[Economic Outlook] Discussion on Expanding Real Estate Supply This Week... Base Interest Rate Likely to Remain Unchanged

Base Interest Rate Likely to Remain Unchanged This Year Following July, August, October, and November Last Year
Focus on 'Fast-Track Apartment Supply Plan' Discussion at Real Estate Market Inspection Meeting on the 15th

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] This week, the Bank of Korea's Monetary Policy Committee will decide the base interest rate. Considering the economic downturn caused by the novel coronavirus disease (COVID-19), the rate is expected to remain unchanged. The government plans to hold a real estate market inspection meeting to discuss supply measures and other issues.

◆ Bank of Korea Monetary Policy Committee Expected to 'Keep Base Rate Unchanged' = The Bank of Korea's Monetary Policy Committee will hold a monetary policy meeting on the 15th to decide the base interest rate, and a unanimous decision to keep the rate unchanged is highly likely.

Since November last year, concerns about economic recession have increased due to the third wave of COVID-19 and the strengthening of social distancing measures, as well as the possibility of overheating in asset markets such as real estate and stocks. Therefore, following the freezes in July, August, October, and November last year, the rate is expected to be held steady for the fifth time in January this year.

Earlier, as the Monetary Policy Committee anticipated an economic downturn due to the COVID-19 shock, it quickly lowered the rate by 0.75 percentage points within two months through a 'big cut' on March 16 last year (from 1.25% to 0.75%) and an additional cut on May 28 (from 0.75% to 0.5%).

On the 13th, the Bank of Korea will release statistics on 'Monetary and Liquidity Conditions in November 2020.' As of October last year, the broad money supply (M2 basis) was 3,150.5 trillion won, an increase of 9.7% compared to October 2019. Given that households and companies have been borrowing heavily amid the COVID-19 situation and low interest rate environment, the money supply in November is also expected to have increased further.

◆ Government Accelerates Discussion on Real Estate Supply Measures on the 15th = The government will hold a real estate market inspection meeting on the 15th.

This meeting is chaired by Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki, with participation from Minister of Land, Infrastructure and Transport Byun Chang-heum and other minister-level officials related to real estate. While major real estate measures have been announced through this meeting in the past, this time it is expected to focus on reviewing the current market situation and actively discussing the 'fast-track apartment supply plan' to be released before the Lunar New Year.

On the 12th, the Ministry of Economy and Finance will announce the monthly fiscal trend report. The reference point for this report is November last year. Since only December is excluded, it is expected to provide an overall direction of last year's fiscal indicators. Up to October last year, the managed fiscal balance deficit was 90.6 trillion won, and central government debt stood at 812.9 trillion won.

Meanwhile, Statistics Korea will announce the annual employment figures for last year on the 13th. The number of employed persons decreased by 273,000 in November last year, marking the ninth consecutive month of decline. This is the longest continuous decrease since the 16-month decline from January 1998 to April 1999.