Many Challenges Ahead

DPM Kwon announces disclosure of housing costs and tight credit control to cool housing prices

Deputy Prime Minister as well as Finance and Economy Minister Kwon O-kyu, in his new year's speech, at the New Year's reception held by the Federation of Banks at Hotel Lotte on January 4th in downtown Seoul, said it is not going to be an easy year for the country in terms of economy, with the world economy expected to show a slowdown led by the U.S. economy.
He said the foreign currency exchange rate is likely to be stable, but needs to be watched closely with regard to reactions by each countries on global imbalance and the market concentration.
The top economic planning official said the domestic economy centered on private consumption is likely to have impact from the slowdown of the external conditions on its growth momentum.
Despite these difficult conditions, the government will apply diversified policies for our economy to continue its growth momentum within its potential growth level.
Most of all, the government will conduct stable macro-economic policies for stable economic growth. A substantial part of the national budget will be released early depending on the flow of economic trends and macro-economic policies will be utilized to supplement the economic growth from time to time.
Kwon also said the government will make efforts to increase the housing supply and reduce the housing prices to build a base for stable real estate market, while providing conditions for increased corporate investment to create many jobs in the country.
The finance and economy minister also said the government will push measures to strengthen the service industry's competitive edge and an overall measures to improve the climate for corporate investment and supplement them where needed.
The government will also promote restructuring of small and medium companies by speeding up M&As and switch to other businesses by supplementing the framework for restructuring.
For stable livelihood of the general public, the government is ready to take measures to fire up finance for the general public, stable employment, and expand welfare for the under privileged and other measures to meet the objectives.
The government will also spare any effort for completing the negotiations for the free trade agreement with the United States, reform public annual pension, and insurance system under long and medium term perspectives.
When these measures are carried out successfully, the government expects the economic growth to reach mid-4 percent range with the inflation rate controlled over 2 percent range with the creation of 300,000 jobs this year.
The deputy prime minister went on to praise the financial officials for their achievement to upgrade the financial industry last year. He said the KOSPI broke the 1,400 level signaling the stable growth of the financial market and with almost all of the financial companies including banks improving their operations last year raising the soundness of the financial industry.
But the financial market was exposed to risks partly due to a herd behavior in excessive increase in real estate mortgage loans and short-term foreign currency loan and borrowers bought apartments and houses with loans with credit risks rising to dangerous levels. Short-term foreign currency borrowings rose sharply despite the reductions in current account surpluses, which led to the appreciation of the Korean won currency.
At the same time, the financial institutions expanded their loans to individual borrowers with real estate mortgage, to SMEs, and in foreign currencies forcing the government to act sternly to prevent any negative impact on the financial market from a herd behavior. The government has been monitoring the situation carefully to come up with countermeasures.
The monetary authorities have been promoting various measures to curb the excessive demand for loans by using such tools as LTV, DTI and the registration of loan borrowers. The central bank has raised the reserve deposit rates and reduced overall loan amount system to curb excessive loan demand. Under such effort, the loan increase rate was tempered, but it is too early to determine that insecure factors have been removed entirely.
Under these circumstances, the financial policies will be directed toward management of risks for the financial market with utmost priority. nw

Deputy Prime Minister as well as Finance and Economy Minister Kwon O-kyu