South Korea’s Finance Minister Prioritizes Demand Recovery Over Household Debt, According to Reuters

South Korea’s Finance Minister Choi Sang-mok announced on Wednesday that the government’s immediate focus is more on addressing the slowdown in domestic demand rather than on rising household debt. During a discussion forum, Choi emphasized that, as the deputy prime minister for economic affairs, he views the recovery of domestic demand as a priority in the short term.

Choi expressed confidence that the Bank of Korea would make prudent decisions following a recent interest rate cut by the U.S. Federal Reserve. Last week, the Fed initiated a series of expected interest rate cuts with a significant half-percentage-point reduction, an action Federal Reserve Chair Jerome Powell explained was aimed at maintaining low unemployment as inflation begins to subside.

In its most recent meeting last month, the Bank of Korea opted to keep interest rates steady at 3.50%, the highest rate since late 2008. Board members cited concerns over escalating house prices and household debt, even as inflation was easing and domestic demand appeared to be slowing.

House prices in South Korea showed a notable increase in August, with prices in the capital, Seoul, rising at the fastest rate in more than four and a half years, despite a government initiative aimed at boosting real estate supply. Choi stated that the government will persist in its efforts to stabilize the housing market by ensuring adequate supply and will soon introduce measures to help stabilize input costs for construction firms.

Looking ahead, Choi projected that South Korea’s economic growth could reach around mid-2% in 2024, potentially exceeding its growth potential. He noted that strong exports are likely to drive this economic growth, while the recovery of domestic demand remains relatively weak.