Lee Chang-yong, the Governor of the Bank of Korea, mentioned that with the formulation of the second supplementary budget, this year's gross domestic product (GDP) growth rate in Korea could increase by 0.1 percentage point. He also projected that the recovery in private consumption and semiconductor exports would add upward pressure on growth. However, the governor diagnosed that financial imbalance has expanded due to the recent surge in household debt, emphasizing that the increase in housing prices must be curbed.
On the morning of the 10th, at a news briefing on currency policy direction held at the Bank of Korea in Jung-gu, Seoul, Governor Lee responded to a question regarding the larger-than-expected scale of the second supplementary budget and its likely fast execution, saying, "It seems possible to achieve a growth rate of 1% this year."
The governor stated, "In the revised economic outlook announced in May, I projected a growth rate of 0.8% for this year, and it seems it could rise by 0.1 percentage points due to the second supplementary budget." He added, "In addition, consumption has improved more than expected, and exports, especially in semiconductors, are also recovering, so there is likely to be a positive effect."
However, he noted that there is a possibility of a slowdown in growth due to tariff uncertainties. The governor said, "In May, I assumed that a tariff of about 10% would be imposed on Korea, but now it's uncertain whether it will remain at 10% or increase to 25%." He further commented, "The tariffs on our corporations' production bases in Vietnam, Mexico, Canada, and China have also not been determined, adding to the uncertainty."
He mentioned, "The future growth path could change depending on the result of negotiations by the end of July," and added, "If tariffs are announced on the 1st of next month, and the execution speed of the supplementary budget becomes clearer, we will review the data and publish the growth rate again at the August monetary policy meeting."
He noted that the rising trend in housing prices will be closely monitored in the interest rate decision process. The governor stated, "After the currency policy direction was announced in May, the housing market, especially in the metropolitan area, became very overheated, leading to an increase in household debt and significantly raising concerns over financial imbalances." He diagnosed, "In particular, the scale of household debt has reached a critical level that could greatly constrain consumption and growth."
He indicated that the current real estate market situation is more serious than it was in August of last year. At that time, the Bank of Korea froze interest rates out of concern for rising housing prices, which contradicted market expectations. The governor said, "The current real estate market, where household debt increases amid declining market rates, is similar to last August, but the pace of rising housing prices in the metropolitan area is faster than last year," and emphasized, "It is a more challenging situation now."
He stated, "The scale of household debt can be expected to have a lagged effect from previous contracts, allowing for proactive measures, but if housing prices rise, demand could increase despite government regulations, so prices must be controlled." He warned, "If tariffs increase as expected, and if housing prices do not stabilize, the conflict between financial stability and growth could worsen." Amid pressures for economic stimulus due to a slowdown in exports resulting from shocks to U.S. tariffs, the burden of household loans could lead to a situation where interest rates cannot be lowered or raised.
During the news briefing, there was also mention of the won stablecoin being promoted mainly by the private sector. A stablecoin is a cryptocurrency designed to maintain a fixed value relative to fiat currencies such as the U.S. dollar or the euro. The governor remarked, "As digitalization advances, I think in the future, there will be a need for a won stablecoin, as currency will be able to incorporate programs to perform many functions."
However, he cautioned about the "method of introduction," stating, "If the issuance of won stablecoins is allowed for non-bank financial institutions, a multitude of private currencies could be created, each with different values. In such a situation, it would be difficult to conduct currency policy and various side effects could arise."
The governor is considering whether it is better to gradually issue the currency through banks or to implement it within a network that the Bank of Korea can monitor, even if it is only among banks, stating, "We will slowly test what method to adopt and consider it carefully."
The governor also spoke out about the organizational restructuring of the new government. He stated, "A structure must be established so that macro-prudential policies can be strongly enforced, but the government has limitations due to its focus on stabilizing the economy." He emphasized, "The Bank of Korea must raise its voice to establish a governance structure that allows for the enforcement of macro-prudential policies."
Specifically, he argued that the Bank of Korea must have supervisory authority over non-bank financial institutions. He noted, "Many issues arise in the non-bank sector, where the Bank of Korea has no supervisory authority, and for the sake of the country's economy, the Bank of Korea should have joint inspection or investigation authority over non-bank institutions."