A recent U.S. rate hike may have little direct impact on the South Korean economy but its fallout may grow considerably should it cause financial instability in newly emerging markets in Asia, the country's central bank said Tuesday.

"There is a possibility the U.S. rate hike will reduce global liquidity, which in turn may significantly increase the burden of newly emerging market countries to repay their foreign debts while also expanding capital outflow from such countries," the Bank of Korea (BOK) said in a report submitted to the National Assembly.

"Should economic uncertainties spread from newly emerging market countries, our economy too is expected to be subject to considerable amounts of direct and indirect impacts," the semiannual report added.

The U.S. Federal Reserve its policy rate by 0.25 percentage point less than a week ago, marking its first rate hike in nearly a decade.

BOK Gov. Lee Ju-yeol and many others had long urged the U.S. Fed to keep the pace of its rate hike under control, insisting that anything more than a slow succession of rate increases will cause havoc in financially weak countries.

The Fed responded with a clear message that its rate hike will be gradual.

The BOK, however, noted a gradual rise of the U.S. rate could still be damaging to the local economy should it be coupled with a slowdown in the Chinese economy.

"An analysis showed the country's ability to raise foreign capital will be significantly undermined should China's economic slowdown, economic instabilities in newly emerging countries and a U.S. rate hike take place all at the same time," the report said.

Financial uncertainties may also have direct implications on local companies and households.

The country's household debt has reached a record high of 1,166 trillion won ($990.4 billion) as of end-September, spiking 10.4 percent from a year earlier.

Apparently more concerning is the fact that households' abilities to pay back debt, on the other hand, has greatly worsened.

The ratio of household debt to the household disposable income came to 143 percent as of the end of September, climbing 5 percentage points in just six months from 138 percent as of end-March, according to the report.

Companies are in no better shape.

The proportion of local companies with a debt ratio of over 200 percent has increased to 12.9 percent of all local firms as of end-June from 12.3 percent six months earlier. Also, combined sales of local firms dwindled 7.1 percent on-year in the first half of the year, it said. (Yonhap)