President Yoon Suk-yeol speaks during a weekly meeting on the economy on Thursday. (Yonhap)
President Yoon Suk-yeol pledged Thursday to help low-income earners with their mounting debt burdens, a day after the central bank made its biggest single rate hike to tame persistent inflation, at a weekly meeting he convened for the second time.
The meetings deal with pressing economic issues affecting what they call a “vulnerable group” of self-employed people, small business owners and those fresh out of college. Policymakers discussed inflation last week. This week, they unveiled measures to help the group ride out higher borrowing costs.
“If the group falls, the entire economy collapses … we cannot let them take the brunt of soaring prices and surging interest rates,” Yoon said. The benchmark rate rose by 50 basis points to 2.25 percent despite concerns over worsening household debt.
As of the first quarter this year, the debt amounts to a little over 104 percent of Korea’s gross domestic product, making Asia’s fourth-largest economy the most indebted among 36 major economies reviewed by the Institute of International Finance.
“The government will push for debt relief,” Yoon said at the meeting.
Later in the afternoon, the Financial Services Commission said it would expand a program to help the vulnerable group switch into loan agreements with better terms and extend their repayment periods.
As part of the current program that has already rolled over four times, maturing loans taken out by the vulnerable group are set to expire in September this year. Financial institutions taking part in the program will decide on their own whether to extend the loans again, the top policymaker said.
“As far as I know, the institutions have already rolled out services to help out the group,” FSC Chairman Kim Joo-hyun said.
Young Koreans fresh out of college or aged between 19 and 39 will be able to take out more loans to cover the higher cost of “jeonse,” where tenants pay a lump-sum cash deposit to rent a home and receive it back once the standard two-year contract expires.
They will also get government help in paying off their debts from stock investments. Chairman Kim said the commission will run a thorough screening process so as not to publicly endorse reckless investments.
“Unless we need to ask the National Assembly to change laws to make all our plans work, we expect to see them take off by the third or fourth quarter,” Kim said.
By Choi Si-young (email@example.com