South Korea calls the gates of recession, while in Seoul real estate is growing exponentially, which threatens the financial stability of the country. The Central Bank has no choice but to agree on two crises with decisions for each of them are incompatible. And, as if this was not enough, the Asian country is one of Trump’s most subject to commercial war.
Korea Bank, Central Bank of South Korea, I retained types today at 2.5%But the fact that can be interpreted as a reasonable movement of monetary policy is hiding the devilish and traumatic script, through which many developed economies, such as European.
The worst of the worlds exploded for South Korea and its Central Bank. The Korean economy calls the recession, sitting in a huge bubble in the field of real estate. An authentic nightmare for the Central Bank, which should stimulate the activity without inflating even more assets that already smell of an explosion.
In his statement, Korea Bank clearly spoke about his concern for “Debt debts and prices for acceleration in Seoul and its environs, as well as the debt of the household”A field for any observer, the irreferation with which the institution expresses its difficulties and a way to leave prices for stability stability.
But, on the one hand, Inflation seems more than controlledThe field “faced with the future, it is expected that inflation will remain about 2%, due to moderate pressure of demand and stabilization of world oil prices,” he says. The essence expects that the CPC will end at the level of 1.9%. On the other hand, Korea Bank has taken radical measures to maintain housing prices.
Housing measures in housing
Thus, the organization limited mortgage loans with 600 million Korean rains (about 370,000 euros), increased the requirements for banks and strengthened the ratio of provisions in order to stabilize the real estate market. “Currently, the debate of the monetary policy of South Korea consists in the evolution of the prices for housing Seoul and Governor Rang Jong himself, confirmed this change in priorities during a press conference,” explains Min Ju Chang, economist in South Korea and Japan.
But the problem is not only that the average price of small apartments Seaul has doubled over the past five years and for the first time in history has exceeded 1000 million rains (more than 600,000 euros). Or that it measures the same restrictive as it does not allow buying an apartment if it is not an ordinary place of residence, does not work. Korea Bank should also deal with an economy registered by a quarterly fall by 0.2% in the first quarter And the increased risk that Trump’s tariffs condemn economic activity into a recession.
“Korea Bank wants to reduce rates in order to increase the economy, but is concerned that the lowest rates generate bubbles in the real estate market, which affects financial stability,” says Chong-Hong Park, standard research leader in Seoul. It is about blowing and pulling at the same timeField
Four out of six members of the board of directors are open for additional reduction in the next three monthsThe field since the negative trend of GDP lasted for some time, the economy still requires relatively expansive monetary conditions. “The current 2.5%is probably slightly higher than the estimated level of a neutral type,” they emphasize, emphasizing that the types are at a favorable restrictive point containing excess real estate.
“We believe that August can be something premature for the Korean Bank to confirm the moderation planned in the field of housing prices and debt of households. However, the probability of reducing the type in August is still quite high, ”experts explain.
Dangerous cut
But the real estate market in Seoul and high debt of households largely limits the margin of maneuvering. The governor of Bank Korea, Rang Jong, last month recognized the difficulty of stimulating growth without overheating of the real estate market. Last month, Nomura warned that the weakest financial conditions that determine the rebound in the real estate market contribute to an increase in the debt of householdsWhich last year reached 1,927.3 billion won (about 1.31 billion euros), which is equivalent to 92% of GDP, one of the highest numbers in the developed world.
“Thanks to the warm-up of real estate markets and an increase in the leftist of households, checking the tolerance of the Korean bank in the face of financial imbalance, we hope that the bank will quickly return to financial stability,” says Chong-Vu Park, economist Nomura.
Increased exclusive southern regions in Gangnam, prices rose last month to the highest weekly rates in almost seven years, which corresponds to growth rates during boards in 2018, although the market is still stable in the areas outside Seoul.
Korea Bank said on Wednesday that mortgage loans increased by $ 4.5 billion in June, which is the largest jump in nine months, with an increase of more than 4% of the year, each of the last four months.
Double punishment
The new government is trying to stimulate economic activity. Last week, the ruling party, the Democratic Party, approved a package of fiscal stimuli in the amount of about 20,000 million, which includes direct assistance to 350 euros for citizens. South Korea is one of the countries most affected by the commercial war between the United States and China from its great impact on US trade. But, as if this was not enough, another commercial partner is China, which turns a commercial war into a field of mine for Korea.
Trump retains the same strategy for South Korea as for other countries. He sent a letter that he would introduce a 25%tariff, which gives the deadline to continue negotiations until August 1. In addition, the country supports additional bets on cars that are already in strength and chips. “If the conversations between the United States and South Korea are unfavorable for the market, the expected reduction in August can be more likely,” they say from ING.
Bank Governor Korea recognized today The complexity of the United States tariff theme for South KoreaThe field, while tariffs introduced directly to Korean export, are important, he said that there is also a possible indirect influence of US tariffs on other countries where Korean companies operate production bases such as China, Vietnam and Mexico. In some cases, he said that the indirect influence of tariffs on these countries can be even more than the direct consequences of the US tariffs on Korean products.
