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S. Korea's financial market stable but faces growing uncertainties from pandemic: BOK

All News 11:04 December 24, 2020

SEOUL, Dec. 24 (Yonhap) -- South Korea's financial market continues to be stable, but the coronavirus pandemic is likely to add growing uncertainties to the nation's financial system, the Bank of Korea (BOK) said Thursday.

The nation's financial market maintained stability as an economic downturn from the pandemic eased, the BOK said in a biennial report on financial stability submitted to the National Assembly.

However, the financial market faces more uncertainties due to a rapid resurgence of the virus at home and abroad amid a fragile recovery of the global economy, the BOK said.

The country's financial stability index shot up to 22.3 in April, breaching the lower boundary for a crisis warning, but it has since come down to 7.7.

As of end-September, outstanding debt of South Korean households reached 1,682.2 trillion won (US$1.51 trillion), up 7 percent from a year ago.

Local households' ability to pay back their debts worsened due to reductions in income, apparently caused by the new coronavirus outbreak.

As of the end of September, households' debt to disposable income ratio came to 171.3 percent, up 10.7 percent from the same period last year, according to the BOK.

The BOK warned that vulnerable households may fail to repay their debts if an economic recovery is delayed.

S. Korea's financial market stable but faces growing uncertainties from pandemic: BOK - 1

Businesses too may face serious problems should conditions worsen.

Outstanding debt of South Korean firms stood at 1,332 trillion won at the end of September, up 15.5 percent from a year ago, the BOK said.

The BOK noted the need to cope with a potential credit crisis if an economic recovery falters.

Last month, the BOK held its policy rate unchanged at a record low of 0.5 percent, while slightly revising up this year's economic outlook, amid growing concerns over the nation's third wave of coronavirus infections.

Driven by signs of a modest recovery in exports, the BOK revised up this year's economic growth outlook to a 1.1 percent contraction, compared with a previous forecast of a 1.3 percent retreat.

The BOK expected the economy to grow 3 percent next year, faster than a previous forecast of 2.8 percent expansion for 2021.


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