[Economic Outlook] Household Debt Increased Again...? KEPCO to Announce 4th Quarter Electricity Rates Tomorrow 'First Increase in 8 Years?'

[Sejong=Asia Economy Reporter Son Seon-hee] The Bank of Korea is scheduled to release the 'Financial Stability Report,' which includes recent household and corporate debt trends, on the 24th. This report is compiled based on data as of the end of September, drawing attention to how much debt may have increased further.

In the report released at the end of June, household and corporate credit in the first quarter of this year significantly exceeded twice the size of the Korean economy. The ratio of private (household + corporate) credit to nominal Gross Domestic Product (GDP) stood at 216.3% as of the end of the first quarter, 15.9 percentage points higher than the same period last year. The ratios of household credit and corporate credit were 104.7% and 111.6%, respectively, rising by 9.1 percentage points and 6.8 percentage points compared to last year.

The outstanding household debt was 1,765 trillion won as of the end of the first quarter. Mortgage loans increased by 8.5%, and other loans such as credit loans rose by 10.8%. Due to the prolonged COVID-19 pandemic, the increase in loans is believed to have continued, influenced by hardships in daily life, business difficulties, and increased demand for asset investment.

The Bank of Korea will also announce the 'August Producer Price Index' on the same day. The July Producer Price Index (110.02, with 2015 as the base year 100) rose 0.7% from the previous month due to soaring agricultural product prices caused by the heatwave and increases in petroleum and raw material prices. This marks the ninth consecutive month of increase since November last year. Attention is focused on whether the upward trend in producer prices has eased amid ongoing inflation concerns.

The government will hold a macro-financial meeting on the 23rd. This meeting will discuss analysis and response measures regarding the results of the U.S. Federal Open Market Committee (FOMC) regular meeting held on the 21st and 22nd.

Financial authorities will also provide guidance on plans to supplement financial companies' explanation obligations and improve unregistered brokerage activities on online platforms ahead of the end of the grace period for the Financial Consumer Protection Act on the 24th. Some financial platforms, including KakaoPay, suspended insurance comparison and quotation services after being pointed out by financial authorities for conducting brokerage activities without registration as sales agents or brokers.

Additionally, the trend of short selling by individual investors will be disclosed following the resumption of short selling in the stock market in early May after a 1 year and 2 months hiatus. Among individual investors, there are strong criticisms that the domestic short selling system is overly favorable to institutions, along with demands for reform of the system. Financial authorities previously announced plans to extend the maturity of lending stocks to activate short selling by individual investors.

Meanwhile, Korea Electric Power Corporation (KEPCO) is expected to announce on the 23rd whether electricity rates will be increased in the fourth quarter (October to December). The fourth-quarter electricity rates, to be applied from the 1st of next month, are expected to be posted on KEPCO's website on the morning of that day. Considering recent fuel cost increases and KEPCO's deficit financial situation, there is speculation that electricity rates are likely to rise. If rates are increased, it will be the first hike in about eight years since November 2013.