SEOUL, 24 Dec. (Yonhap) — South Korea’s financial market remains stable, but the coronavirus pandemic is expected to add growing uncertainties to the country’s financial system, the Bank of Korea (BOK) said Thursday.
The country’s financial market remained stable as the economic downturn due to the pandemic eased, the BOK said in a biennial financial stability report submitted to the National Assembly.
However, the financial market faces more uncertainties due to a rapid resurgence of the virus at home and abroad amid a fragile recovery in the global economy, the BOK said.
The country’s financial stability index climbed to 22.3 in April, breaching the lower limit of a crisis warning, but has since fallen to 7.7.
At the end of September, South Korean household debt outstanding reached 1,682.2 trillion won ($1.51 trillion), up 7% from a year ago.
The ability of local households to repay their debts has deteriorated due to lower incomes, apparently caused by the novel coronavirus outbreak.
At the end of September, the household debt-to-disposable income ratio stood at 171.3 percent, up 10.7 percent from the same period last year, according to the BOK.
The BOK has warned that vulnerable households may not repay their debts if the economic recovery is delayed.
Businesses can also face serious problems if conditions worsen.
South Korean corporate debt outstanding stood at 1.332 trillion won at the end of September, up 15.5 percent from a year ago, the BOK said.
The BOK noted the need to deal with a possible credit crunch if the economic recovery falters.
Last month, the BOK kept its key rate unchanged at a record low of 0.5%, while revising the economic outlook for this year slightly upwards, amid growing concerns over the third wave of infections. to coronavirus in the country.
Buoyed by signs of a modest recovery in exports, the BOK upgraded the outlook for economic growth this year to a contraction of 1.1%, against a previous forecast of a decline of 1.3%.
The BOK expects the economy to grow 3% next year, faster than a previous forecast of 2.8% expansion for 2021.