Korean financial authorities debunk September economic crisis rumors

Financial Supervisory Service (FSS) Governor Lee Bok-hyun, left, answers during a National Assembly plenary session on Sep. 4. Financial Services Commission (FSC) Chairman Kim Joo-hyun sits on the right. [Photo by Yonhap]

South Korean financial authorities recently dismissed concerns over a looming economic crisis in September, arguing that they are groundless given a slower rise in property project-finance (PF) loan delinquencies.

Top industry figures, including Financial Services Commission (FSC) Chairman Kim Joo-hyun and Financial Supervisory Service (FSS) Governor Lee Bok-hyun, convened on Sunday to conclude that the risk of the September economic crisis lacked solid evidence, the financial sector said on Tuesday.

FSC Chairman Kim Joo-hyun debunked the rumors about a financial crisis in September during a National Assembly plenary session on Monday.

“Despite the uncertainty prevalent across the economy, I don’t believe there will be a crisis as per the concerns raised by certain media outlets and YouTube channels,” he said.

The financial authorities concluded that the financial market and industry have been in good shape, with securities firms of financial soundness that is strong enough to make them respond to potential crises.

However, the authorities will closely monitor the risks, such as China’s troubled property sector, the U.S.’s prolonged high inflation, and investments in international commercial properties made by local securities firms.

“False information and groundless rumors could threaten the financial market,” an unnamed official from the authorities warned.

The financial authorities also cited an ongoing slowdown in the growth of real estate PF loan delinquency rates as evidence for their conclusion. The delinquency rate for real estate PF loans suggested a slower growth, with 2.10 percent as of late June, up 0.09 percentage points from 2.01 percent at the end of March.

Amid a slump in the property industry, the index rose from 0.55 percent at the end of 2020 to 2.01 percent in March, alarming the market.

But financial authorities saw no concerning factors, as ongoing programs designed to pull off a soft landing, such as the Korea Asset Management Corp. (KAMCO)’s fund worth 1 trillion won ($756.1 million), have been effective.

Speculation about a looming debt crisis among self-employed individuals in September was also debunked by the financial authorities. The speculations came as the maturity extension and forbearance measures that aided small and medium-sized businesses during the COVID-19 pandemic are expected to end in September.

The maturity extension, however, ends as of September 2025, with some transitioning into self-sustainable repayment and leading to a gradual reduction in outstanding balances.

The South Korean economy has been in good shape with indicators of robust domestic consumption, employment, and price increases amid the recent resumption of group tour programs to South Korea from China.

Exports are expected to continue their growth trend into the second half of this year as semiconductors, the primary export commodity, are showing signs of recovery. The trade balance has also been in surplus for the third consecutive month.

Price increases have slowed with July’s trough of 2.3 percent in 25 months.

South Korea also experienced a strong hiring momentum, highlighted by the record-high employment rate of 63.2 percent in July, a record-low unemployment rate of 2.7 percent, and a 29th consecutive month of growth in the labor force size.