The global chip shortage shows no signs of abating, hurting various industries including electronics and car manufacturers, while concerns linger about the negative impact of a rate hike on the household debt burden. The growth pace slowed a bit, but a closer look at the details reveals that mortgage loans climbed by 20.8 trillion won to 969 trillion won in the third quarter - the biggest increase since the fourth quarter of 2016 and a reflection of explosive demand for houses.Īlthough the central bank kept its 2021 growth outlook unchanged at 4 percent and forecast a 3 percent increase next year, Asia’s fourth-largest economy has to navigate a thorny web of challenges to shore up its economy. The government tried hard to tighten lending rules to tame household debt, but the data released Tuesday shows that household credit reached a record high of 1,844.9 trillion won ($1.58 trillion) as of end-September, up 36.7 trillion won from three months earlier. The country’s housing prices in the first nine months of this year spiked nearly 12 percent, the largest surge in 15 years. Those surged during the pandemic, as speculative real estate investments on the back of record-low interest rates proliferated despite the repeated - and largely futile - introduction of government policies to battle property speculation.īOK board members earlier pointed out that the inclusion of housing costs would show that Korean inflation is higher than the usual figures suggest, a view that calls for more aggressive steps. The fast-paced and continual rise in consumer prices, coupled with stagnant income, could deal a blow to the economy in a way that undercuts the purchasing power of Korean households.īut the headline numbers may understate the true rate of inflation, since the BOK data does not include housing costs.
Amid the global supply chain disruptions and rising energy costs, prices for a wide range of products are shooting up. On Thursday, the Bank of Korea raised the forecast for 2021 consumer prices to 2.3 percent, up from a previous estimate of 2.1 percent. The latest rate hike had been hinted at by the central bank on several occasions, as worries mounted about fast-growing household debt spurred by low borrowing costs during the pandemic, as well as accelerating consumer prices.īut it is not clear whether the current pace of the BOK’s rate hikes will continue as planned, considering a host of volatile factors such as the resurgence of COVID-19 infections and the nearsighted policy promises from presidential hopefuls that could send misleading signals to the market.Ĭonsumer prices rose 3.2 percent in October from a year earlier, marking the fastest clip since 2012. The move came after the central bank raised the rate from an all-time low of 0.5 percent to 0.75 percent in August this year. The monetary policy board of the Bank of Korea voted to increase the benchmark seven-day repo rate by 0.25 percentage point to 1 percent, ending a 20-month period in which rates were held below 1 percent to support the pandemic-battered economy. We solicit your feedback please do get in touch.South Korea’s central bank raised the key rate Thursday, as widely expected, in a bid to rein in rising inflation and snowballing household debt that could derail the economic recovery from the pandemic, but the road ahead appears bumpy. In view of the importance of sharing our insights, and given that our structural results are very robust to errors in market demand estimation, we have decided to write this paper now.
Our work and results are indicative, and definitive insights can only be obtained in hindsight. For companies upstream in the supply chain, the impact of the inventory evolution is much stronger than the exact details of the market recovery. Regardless of how the market recovery will evolve, we demonstrate the criticality of monitoring cumulative supply chain inventory and market demand. Our results suggest that inventory dynamics may be very large, caused by dramatic drops in demand. We estimate the supply chain dynamics that we may see unfold over the next few months. We extend our validated system dynamics models that we deployed 11 years ago during the credit crisis to model the production lockdown caused by the Covid-19 crisis.
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