A central bank policy board member on Friday stressed the need for a soft landing of the country's household debt, citing it as one of the economy's weakest spots.
"The household debt issue has mounted for decades. While it was not a problem when the property market was booming, situations have changed," Bank of Korea (BOK) policy board member Ha Sung-keun told reporters at a luncheon, calling it "one of the biggest weaknesses."
"It is important to induce the soft landing of household debt. But it is also important not to tighten regulation too much," said Ha, emphasizing the balance between invigorating the economy and reducing household debt.
Household debt has been cited as a lingering risk for Asia's fourth-largest economy, with the figure breaking the 1,000 trillion won (US$908 billion) mark in the third quarter.
The growth in demand for household loans has been accelerating as the government eased mortgage lending rules and the central bank lowered the base rate to a record low of 2 percent.
The policy board member, an economics professor who was recommended to the post by the financial regulator, also raised concerns over the economy's weakness against external conditions.
Ha said that the structure of the financial market is "one-sided," noting how the financial market fluctuates depending on foreign fund flows, and raised the need to bolster safety measures, such as foreign currency swaps.
The board member, meanwhile, said that Asia's fourth-largest economy is going through an unprecedented situation as global oil prices and foreign exchange rates move in unexpected directions.
The seven-member policy board led by BOK Governor Lee Ju-yeol lowered the base rate by a quarter percentage point in August and October this year as part of efforts to boost growth and spending.
Nearly half of the analysts and economists polled by Yonhap Infomax, the financial news arm of Yonhap News Agency, said the policy board is likely to implement another rate cut in the first quarter of 2015. (Yonhap)
