Deputy Minister of Economy: "Liquidity, a Double-Edged Sword... Controversy Over Virtual Asset Overheating Expands" (Comprehensive)

Government to Chair Macroeconomic Financial Meeting on 23rd
"Some Expansion in Stock Market Volatility... Strengthening Risk Assessment"

Kim Yong-beom, the 1st Vice Minister of Strategy and Finance, is speaking at the Macroeconomic Finance Meeting held at the Bankers' Hall in Jung-gu, Seoul on the 23rd. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Jang Sehee] The government has decided to actively manage the expanded liquidity that arose during the crisis response process. It plans to actively monitor the financial market to prevent liquidity from flowing into unproductive sectors such as real estate.

Kim Yong-beom, First Vice Minister of the Ministry of Economy and Finance, stated at the macroeconomic financial meeting held on the 23rd at the Seoul Banking Hall, "Abundant liquidity is like a double-edged sword; it is necessary to build 'water control' to ensure it reaches essential areas and does not overflow into unnecessary ones." He added, "We will promote the inflow of market funds into productive sectors while actively managing to prevent inflows into unproductive sectors such as real estate." This means ensuring that the abundant liquidity does not undermine financial stability.

He particularly addressed the recent sharp rise in Bitcoin prices, diagnosing that "Abundant global liquidity is moving in search of new stores of value, which has recently expanded debates over overheating in the virtual asset market."

Vice Minister Kim further stated, "Some support measures that have fulfilled their roles will be normalized, but financial support necessary for overcoming COVID-19 damage and economic recovery will be maintained." The government plans to faithfully implement the second financial support program for small business owners, special loans for restricted business sectors, and promptly conclude maturity extensions and interest payment deferrals across all financial sectors.

The policy-type New Deal fund sub-fund will also be established next month. He emphasized, "To induce capital inflow into the Korean New Deal sectors, we will complete the selection of entrusted operators for the policy-type New Deal fund by the end of February and smoothly commence the establishment of sub-funds from March."

The government's emphasis on liquidity management stems from the judgment that while expectations for economic recovery are emerging due to improvements in the COVID-19 situation, risk factors coexist.

Supported by the recovery in exports, the consumer sentiment index rose for two consecutive months. According to the 'February 2021 Consumer Sentiment Survey Results' announced by the Bank of Korea on the same day, the consumer sentiment index for this month was 97.4, up 2.0 points from the previous month.

Vice Minister Kim evaluated, "The slowdown in the spread of COVID-19 and adjustments in social distancing levels positively influenced the recovery of consumer sentiment," but also noted, "Concerns about inflation, liquidity withdrawal in China, and uncertainties surrounding domestic and international economic and financial markets have caused some expansion in market volatility."