SEOUL- South Korea’s household credit shrank in the fourth quarter of 2022, its first quarterly decline in nearly a decade, central bank data showed on Tuesday.
The country’s total household credit fell 0.2 percent, or 4.1 trillion won ($3.16 billion), in the fourth quarter from the previous quarter, to 1,867.0 trillion won by the end of December, according to the Bank of Korea.
The quarterly decline was the first since the January-March quarter of 2013 and the biggest percentage fall since the first quarter of 2009.
On an annual basis, the total credit increased 0.2 percent, marking its slowest growth since data collection started in the fourth quarter of 2002.
South Korea’s central bank has raised interest rates by a total of 300 basis points since August 2021, including a 25-basis-point rate hike last month, which is widely expected to have marked the end of the current tightening cycle.
Meanwhile, the Bank of Korea will hold its base interest rate at 3.50 percent on Thursday and for the rest of this year, suggesting its longest tightening cycle on record is over despite still high inflation, a Reuters poll of economists found.
After raising rates by 300 basis points since August 2021, the BOK is managing a shrinking economy – the 0.4 percent contraction last quarter was the first in 2/1-2 years – as well as falling exports and high household debt.
At the same time, consumer price inflation, at 5.20 percent in January, is well over double the central bank’s 2.00 percent target and is not expected to return there for at least another year, according to a separate Reuters poll.
All 42 economists polled Feb. 13-20 predicted no change to the 3.50 percent base rate, already the highest since late 2008, at the central bank’s Feb. 23 meeting.
Only a few respondents expected rates to climb above 3.50 percent at some point this year, while nearly half expected at least one rate cut by year-end.
Nearly 90 percent of economists who provided forecasts through the first quarter of next year, 26 of 29, expected the base rate to fall below 3.50 percent then, with a majority forecasting 3.00 percent or above, compared with 3.25 percent or higher in the previous poll. — Reuters
