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S. Korea worries about economic uncertainties after Trump's presidential win

Xinhua, November 11, 2016 Adjust font size:

South Korea's top central banker expressed worries on Friday about economic uncertainties after Donald Trump's presidential win in the United States.

Bank of Korea (BOK) Governor Lee Ju-yeol told a press conference after the monthly rate-setting meeting that if the U.S. president-elect's campaign pledges are realized into policies, they are feared to negatively affect South Korea's exports as well as the global trade.

The central banker cited the re-negotiation of the U.S.-South Korea free trade agreement (FTA), the withdrawal from the Trans-Pacific Partnership (TPP), higher tariff and non-tariff barriers as Trump's pledges that may negatively affect the South Korean economy.

Lee, however, noted that it remains to be seen whether Trump's pledges would be turned into actual policies, saying the president-elect also announced positive economic policies such as tax cuts, deregulations and expansionary fiscal spending.

The BOK head and six other policy board members unanimously decided to keep the benchmark interest rate on hold at 1.25 percent, the lowest in history.

The Lee-led central bank cut its policy rate from 3.25 percent in July 2014 to the current level in June this year, sparking concerns about massive household debts and the bubble forming in the housing market.

Debt-servicing burden for households increased recently as market rates advanced on the expected rate hike in the United States later this year.

Governor Lee admitted that record-low borrowing costs contributed to the fast growth in household debts, but he also attributed the government's deregulation on mortgage financing to the worrisome debt level.

"In addition to low interest rates, the government eased various regulations to stimulate the housing market situations, leading to higher home prices and increased demand for (home-backed) loans," he said.

Lee said household debts would weigh down on private consumption in the long term, adding those having difficulties in repaying debts could have further hardships in the short term. Endit