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| A man passes by a board that lists interest rates on savings accounts in Seoul. Korea Times file |
By Lee Kyung-min
One in two local businesses said news of lower borrowing rates would be the most welcome development this year, according to a survey, Sunday. The Korea Chamber of Commerce and Industry (KCCI) surveyed 3,267 businesses, asking which news headlines they would want to see the most this year.
According to the survey, 51.2 percent of respondents said that lowering borrowing rates brought on by price stabilization was a key wish shared by local businesses.
Behind the consensus view lies the rapid monetary tightening which has occurred over the past year. The Bank of Korea (BOK) delivered seven consecutive key rate hikes in 2022 to counter the acceleration of inflation as well as the sharper rate hikes by its U.S. peer. The latest tightening of a quarter-percentage point by the Korean central bank on Jan. 13 led to the key rate standing at 3.5 percent.
The key rate hike led to steeper borrowing rates for both households and corporate entities.
Borrowing rates for mortgage holders and unsecured loans spiked to over 8 percent last month, which is a 14-year high. The financial authorities have since advised commercial lenders to lower the interest rates so as to help relieve the cost of living.
Similarly, the KCCI survey said that corporate borrowing costs for the first three quarters of last year were up 22.3 percent from the year before.
"The aftereffects of rapid monetary tightening will continue to hit every corner of the real economy, in the form of weakening consumption, reduced investments and elevated credit risks for corporate entities and households," the KCCI said.
The next on the list was the end of the COVID-19 pandemic with 42.9 percent, the end of the Russia-Ukraine war and the subsequent fall in energy and other raw material prices at 39.1 percent and the economic recovery of Korea's key trading partners including China was at 19 percent.
Accounting for 16.8 percent was the robust performance of Korea's key export industries including the manufacturing of semiconductors, shipbuilding and rechargeable batteries as well as nuclear energy and defense industries.
This was then followed by the expansion of exports concerning Korea's cultural content at 16 percent and the dissipation of protectionist trade risks as illustrated by the U.S. Inflation Reduction Act (IRA) and European Union (EU) carbon border adjustment mechanism (CBAM) which accounted for 15 percent.
KCCI research division head Kang Seok-goo said local businesses remain hopeful about a marked turnaround in the economic environment and financial conditions.
"Korea was the sixth largest exporter on the global stage, an extremely meaningful result underpinned by large numbers of orders in the defense and energy industries. We have a lot to look forward to this year," he said.
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