The Bank of Korea foretells the tone of loose monetary policy and lists asset price increases and private credit as risk factors.
The Bank of Korea released a report on the 25th entitled “The Implementation Direction of Monetary Credit Policy in 2021”, stating that the spread of the new crown epidemic and the speed of vaccine commercialization have brought greater uncertainty to the path of economic growth. In order to facilitate economic recovery, monetary policy will remain a loose keynote.
However, the central bank is worried that financial imbalance risks such as the influx of funds into the capital market and the increase in private credit may accumulate in a loose financial environment. The report emphatically warns that increased leverage may cause financial imbalance risks such as asset price rises, and slow economic recovery may reduce the debt solvency of distressed companies and families in need.
The central bank plans to increase its support for small and medium-sized enterprises in trouble due to the epidemic by improving the efficiency of the loan system next year. Taking into account the new situation and changes in the post-new crown era, it will also try to strengthen support for new growth industries.