There was a side effect of the debt economy, where only low-credit interest rates rose, large corporations benefited from aggressive money release, and expected inflation rose.
The National Assembly Budget Office said, "The expected inflation rate rose 0.5%p from 1.6% in June 2020 to 2.1% in April 2021. If interest rates rise, we cannot rule out the possibility of adjustment of stock prices and housing prices." It was revealed on the 28th as a report.
The Bank of Korea announced on the 28th that the overall household loan interest rate (based on the Bank of Korea) of commercial banks in April was 2.91%, up 0.03%p from March (2.88%), but the interest rate on corporate loans (2.68%) fell by 0.06% point.
President Moon Jae-in said at the fiscal strategy meeting on the 27th, "Not only the class gap but also the gap between the economic sectors is widening. In this case, the role of finance is more important," said President Moon Jae-in. "The Korean version of the New Deal includes comprehensive investments, including taxation and government procurement in addition to fiscal expenditures. Please review it,” he ordered to strengthen the supply advantage policy.
The interest rate on household loans at commercial banks is the highest in 15 months since January (2.95%) of last year before the coronavirus, but in April, the deposit bank's rate of deposit (deposit) fell 0.02 percentage points from 0.86% to 0.84% on average. .
Even with a 0.06 percentage point drop in corporate loan interest rates (2.68%), large corporations fell 0.08 percentage points from 2.52% to 2.44%, while SMEs fell 0.06 percentage points from 2.88% to 2.82%, benefiting large corporations.
This year's national fiscal expansion was already a 8.9% increase in total expenditures before the second supplementary, with the national debt of 965 trillion won, the national debt-to-GDP ratio of 48.2%, and the combined fiscal deficit of -89 trillion won -4.5% of GDP.
The National Fiscal Strategy Meeting presided over by President Moon confirmed the policy to strengthen expanded fiscal expansion through the second supplementary administration, and tentatively confirmed the next year's budget to increase by 7.5% to 600 trillion won.
At the meeting, President Moon ordered, "Please prepare so that the fiscal rules prepared last year can be applied as planned from 2025," but the budget for next year has already exceeded the fiscal rule line -3%, resulting in a combined fiscal deficit of -89 trillion won and GDP. Compared to -4.5%, it is 1.5 times worse.
The report on the'Expected Inflation Rate Trend' of the National Assembly Budget Office said, "With the Korean standard interest rate being maintained at 0.5%, the expected inflation rate rose 0.5%p from 1.6% in June 2020 to 2.1% in April 2021." If interest rates rise, the possibility of adjustment of stock prices and housing prices cannot be ruled out.”
The National Assembly report said, "There are concerns about inflation due to increased liquidity due to corona policy response and expectations for global economic recovery," and predicted that "the inflation rate in major countries will show a higher year-on-year increase as the price of raw materials for crude oil rises."
Regarding the'expected inflation rate rise', the report said, "The government is expected to raise the expected inflation rate, which is a vicious cycle of wages and inflation that induces an increase in nominal wages and nominal prices of goods and services, and inflation again." It is necessary to accurately grasp the scale of bad loans and to take precautions, and to reduce the debt ratio of households and companies,” he said.
Household debt was KRW 1765 trillion at the end of March, an increase of 37 trillion KRW (2.2%) from the 4th quarter of the previous year (16.68 trillion KRW), and one year compared to the early coronavirus (first quarter of last year, 1611 trillion KRW). During the period, it was a surge of 153.6 trillion won (9.5%).
The Bank of Korea said, "Sunshine loans with high interest rates for low creditors are classified as guaranteed loans. Last month (April), the share of Sunshine Loans increased, and guaranteed loan interest rates rose."
Regarding the lower lending rate of large corporations compared to SMEs, he said, "With the drop in indicator interest rates, the proportion of short-term loans for large corporations increased, and in the case of small and medium-sized enterprises, the increased treatment of low-interest loans for facility funds of some banks was affected."