Seoul
The household debt and uncertainties surrounding policy changes under a potential Donald Trump administration as major risks to South Korea’s financial system, Bank of Korea said on Thursday.
The survey, which involved 78 financial and economic experts, found that 26.9% of respondents identified rising household debt and repayment challenges as the top concern.
In addition, 20.5% of those surveyed pointed to possible shifts in U.S. policy under Trump as a significant risk. Other concerns included the impact of nationalistic policies by major economies and weak domestic demand, especially affecting small businesses and the self-employed.
The survey also revealed that South Korea’s household credit surged to a record 1,913.8 trillion won ($1.37 trillion) in the third quarter of 2024, driven largely by an increase in mortgage loans. This marks the highest quarterly rise in household credit since 2002. To address this, the Bank of Korea recently lowered its benchmark interest rate by 0.25 percentage points to 3.25%, the first reduction in over three years. However, officials remain cautious about further rate cuts, citing concerns over rising home prices and growing household debt, particularly in the Seoul area.
Meanwhile, South Korean stocks saw a slight uptick on Thursday morning, driven by gains in technology and battery sectors following Nvidia’s strong third-quarter results.
