South Korea’s economic and financial policymakers expect the country’s economy will be on the steady recovery pace, but cited the snowballing household debt as a risk that could undermine the recovery momentum of the Korean economy.

The finance minister Hong Nam-ki, Bank of Korea Governor Lee Ju-yeol, Financial Services Commission (FSC) Chairman Koh Seung-beom and Financial Supervisory Service (FSS) Chairman Jeong Eun-bo held a macroeconomic financial meeting in Seoul on Thursday to discuss measures to suppress the surging household debts. The last time the country’s four economic policymakers gathered together was in February.

They expected that the Korean economy would maintain its growth momentum despite some external risk factors including global supply shortage, the U.S. imminent tapering and collapse of China’s Evergrande Group. But as the insecure real estate market and ballooning household debts could destabilize the economy, they agreed to join efforts to keep the household loan increase under 6 percent this year and 4 percent next year.

“While curbing the pace of household debt growth as much as possible, we will also seek ways to help people in need to take out loans within their debt repayment range,” said Hong. The Ministry of Economy and Finance also confirmed the policymakers’ commitment to check the debt growth under 6 percent.

The agreement came in line with the FSC’s pledge in April to keep the household debt growth under 5 to 6 percent for this year and pre-pandemic level of 4 percent for the next year. The government will announce detailed measures including ways to protect those who in real need of borrowing.

Amid concerns that the tighter lending regulations could make it more difficult for people to get financial help, a high-ranking official from the FSC said that the government should come up with ways to clearly identify speculators and real borrowers. The government’s emphasis on the principle of giving loans based on income means borrowing would become even harder, the official added.

By Kim Jung-hwan, Kim Yoo-shin and Choi Mira

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