South Korea fin minister prioritises demand recovery over household debt

SEOUL : South Korea’s Finance Minister Choi Sang-mok said on Wednesday that the government’s policy priority was more focused on tackling slowing domestic demand than rising household debt in the short term.
“As the deputy prime minister for economic affairs, I think the recovery of domestic demand is a little more important in the short term,” said Choi, as he answered a question about policy priorities at a discussion forum.
The minister said that he expected the Bank of Korea to make a wise decision after a recent interest rate cut by the U.S. Federal Reserve.
The U.S. central bank last week kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction that Federal Reserve Chair Jerome Powell said was meant to show policymakers’ commitment to sustaining a low unemployment rate now that inflation has eased.
The Bank of Korea last month held interest rates steady at 3.50 per cent, the highest since late 2008, as its board members were concerned about rising house prices and household debt, despite easing inflation and slowing domestic demand.
In August, South Korea’s house prices picked up pace, with prices in the capital Seoul rising at the fastest rate in more than 4-1/2 years, even after a government policy package to boost supply in the real estate market.
Choi said the government would continue efforts to calm the housing market with sufficient supply and announce soon new measures to stabilise input costs for construction firms.
South Korea’s economic growth is expected to be at a level around mid-2 per cent in 2024 and higher than its growth potential, Choi said.
Choi said robust exports would likely lead economic growth, while the recovery of domestic demand was comparably sluggish.