Economic Trends: 1. Real Economy 2. Financial and Foreign Exchange Markets
Economic Trends: 1. Real Economy 2. Financial and Foreign Exchange Markets
Economic Trends: 1. Real Economy 2. Financial and Foreign Exchange Markets
Economic Trends
1. Real Economy 3
Ⅰ. Economic Trends
A. Global Economy
1. Real Economy
simultaneous sluggishness in the economies (%) (%)
8 8
of major countries. By country, in the U.S.
and the euro area, the economic slowdown 6 6
(%) (%)
Slowdown in Global Economic Growth 10 10
6 6
In 2022, the growth of the global economy
stagnated significantly in line with the simul-
2 2
taneous economic downturn of major coun-
tries, which led to the estimation that it would -2 -2
-6 -6
This was largely driven by the prolonged Rus-
sia-Ukraine war, China’s lockdown, tightened
-10 -10
monetary policy stances of major economies, World U.S. Euro Area Japan China India ASEAN-5
and energy supply disruptions. Sources: IMF, statistics agencies of individual countries
1) A detailed explanation of economic trends during 2022 can be found in “I. Monetary Policy Operating Conditions” of
the Monetary Policy Report (Quarterly) published by the Bank of Korea, such as the March 2022 Issue, June 2022
Issue, September 2022 Issue, December 2022 Issue, and March 2023 Issue.
2) The growth rate of the global economy in 2022 estimated by major international organizations: 3.4 percent by the
IMF, 3.2 percent by the OECD·U.N., and 3.1 percent by the World Bank.
By countr y, the U.S. saw its economic
4
growth slow due to rising inflationary pres-
sures and the subsequent rapid policy rate
rises. In the euro area, amid the prolonged
Russia-Ukraine war, the economy continued
to show a downward trend owing to high
inflation. In the case of Japan, the economic
recovery was sluggish, affected by prolonged
quarantine measures in response to the
spread of COVID-19, as well as to the global
economic slowdown. Meanwhile, China ex-
perienced a sharp decline in economic growth
due to its continued zero-COVID policy and
extended slump in the real estate market.3) In-
dia sustained its favorable upward trend until
the third quarter, but later entered a gradual
economic slowdown owing to a worsening of
domestic and external conditions. In the ASE-
AN-5 countries, a favorable economic recov-
ery trend continued thanks to strong exports
and a rise in the number of foreign tourists
stemming from the resumption of cross-bor- Figure Ⅰ- 3. Changes in Global Trade Growth1)
der travel. Into the fourth quarter, however, it
(%) (%)
weakened due to a deterioration of domestic
20 20
and external conditions, such as the economic
15 15
slowdown in major countries and the slug-
10 10
gishness in the IT sector.
5 5
0 0
Downturn of Global Trade
-5 -5
-10 -10
The recovery of global trade weakened,
-15 -15
affected by the global economic slowdown.4)
Entering the second half of the year, trade in -20 -20
2013 2016 2019 2022e
goods saw its growth trend slow, influenced
Note: 1) Based on trade of goods and services.
by global supply chain disruptions and weak- Source: IMF
3) China’s real estate market has maintained a downward trend since the second half of 2021 due to the decline of the
country’s economic growth, strengthened restrictions, and deterioration in consumer sentiment. In particular, since
the China Evergrande Group issue (September 2021), market risks were expanded in relation to a rise in debt de-
faults among real estate development companies caused by the deterioration of financing conditions.
4) Global trade growth (based on IMF statistics): -7.8 percent in 2020 → +10.4 percent in 2021 → +5.4 percent in 2022.
ened economic trends in major countries.
5
Trade in services showed a modest upward
trend, centered on tourism services thanks to
Ⅰ. Economic Trends
the alleviation of entry restrictions.
1. Real Economy
Dubai Brent WTI
International oil prices (based on Dubai (dollar/barrel) (dollar/barrel)
crude oil prices) fluctuated at a generally 140 140
5) International oil prices (annually averaged per barrel based on Dubai crude oil prices): 42.2 dollars in 2020 → 69.0
dollars in 2021 → 97.0 dollars in 2022.
of the slowdown in inflation varied somewhat
6
depending on the country.
B. Domestic Economy
at 2.2 percent year-on-year, lower than 3.0 Notes: 1) Preliminary figures for 2021 and 2022.
percent in the first half of the year. Source: Bank of Korea
6) GDP growth in real terms: -0.7 percent in 2020 → +4.1 percent in 2021 → +2.6 percent in 2022.
7) Change in final consumption expenditure in real terms: -2.2 percent in 2020 → +4.2 percent in 2021 → +4.3 percent
in 2022.
Examining the components of demand,
Figure Ⅰ- 7. C
hanges in Consumption (in real
7
overall consumption (final consumption ex- terms)
penditure) rose by 4.3 percent year-on-year as
Ⅰ. Economic Trends
(%) (%)
the growth of private consumption expanded 8 Consumption (final consumption expenditure) 8
Private
despite a slowdown in the growth of govern- 6
Government
6
1. Real Economy
and a decrease in housing prices, private con- 0 0
8) Change in disposable income in real terms based on “Household Income and Expenditure Survey” conducted by
Statistics Korea: +0.7 percent in 2021 → +2.0 percent in 2022. Number of persons newly employed: 816,000 per-
sons in 2022 (245,000 persons on average between 2015 and 2019).
9) Change in gross fixed capital formation in real terms: +3.5 percent in 2020 → +2.8 percent in 2021 → -0.8 percent in
2022.
face-to-face goods) weakened.10) Approaching
8
the second half of the year, the sluggishness
in exports of goods expanded, due to the
Figure Ⅰ- 10. G
DP Growth and Contributions by
prolonged continuation of China’s lockdown Economic Activity (in real terms)
measures and the downturn in the IT sector.
Agriculture, Forestry & Fishing Manufacturing
The growth rate for exports of services was Electricity, Gas & Water Supply Construction
also significantly reduced because of a decel- Services Taxes Less Subsidies on Products
GDP
eration in global cargo volumes.
(%, %p) (%, %p)
Imports of goods and services in real terms 6 6
-2 -2
Slowdown in Manufacturing Growth and In- 2013 2013 2019 2022p
sector, particularly in face-to-face services. 2017 2018 2019 2020 2021p 2022p
The construction industry shifted to a rise on Manufacturing 3.7 3.3 1.1 -1.1 6.9 1.4
10) Change in exports of goods and services in real terms: -1.7 percent in 2020 → +10.8 percent in 2021 → +3.2 per-
cent in 2022.
11) Change in imports of goods and services in real terms: -3.1 percent in 2020 → +10.1 percent in 2021 → +3.7 per-
cent in 2022.
Non-IT sectors, such as chemical products
Table Ⅰ- 2. Growth Rate of Services by Sector 9
and basic metals, were also mostly sluggish,
(%)
although the transportation equipment sector, 2017 2018 2019 2020 2021p 2022p
Ⅰ. Economic Trends
including automobiles, saw its growth expand Services 2.6 3.8 3.4 -0.8 3.8 4.2
thanks to the alleviation of global supply dis- Wholesale & Retail
Trade, Accommo-
ruptions. 1.8 2.9 3.5 -5.6 3.4 6.8
dation and Food
The service sector registered its growth Services
1. Real Economy
rate at 4.2 percent, higher than 3.8 percent in Transportation &
2.7 3.7 1.7 -17.3 5.3 9.2
Storage
2021. By sector, face-to-face sectors, such as
Finance & Insur-
wholesale & retail trade, food services & ac- 4.2 5.6 3.4 9.6 6.7 2.4
ance
commodations, and transportation & storage, Business Activities 2.0 3.8 2.6 0.1 2.8 2.5
witnessed their recovery expand considerably, Human Health &
6.4 8.2 9.8 1.1 5.2 6.2
Social Work
buoyed by the easing of quarantine measures.
Source: Bank of Korea
The business activities and the human health
& social work sectors also sustained a favor-
able uptrend.
The construction sector climbed by 0.3
percent year-on-year, led by the building
construction business. The growth rate for
the agriculture, forestry, and fishing sector
shifted to a decrease, registering minus 1.3
percent, while the electricity, gas, and water
supply sector continued its upward trend with
a growth rate of 1.9 percent.
1.6 percentage points over the previous year. (10,000 persons) (10,000 persons)
100 100
The total unemployment rate decreased by 0.8 81.6
80 80
percentage points, year-on-year, to 2.9 per-
60 60
cent. The youth unemployment rate, covering 36.9
40 40
people aged 15 to 29 fell from a year earlier by 31.6 30.1
-20 -20
-21.8
-40 -40
-60 -60
2017 2018 2019 2020 2021 2022
Ⅰ. Economic Trends
2017 2018 2019 2020 2021 2022
an increase from 4.6 percent in 2021. By em- Economically
2,775 2,790 2,819 2,801 2,831 2,892
ployment status, regular workers saw a rise Active Population
in wage growth, in line with a sharp increase Change Rate 1.2 0.5 1.0 -0.6 1.1 2.2
1. Real Economy
market and high inflation expectations. In the Employed Per-
2,672 2,682 2,712 2,690 2,727 2,809
meantime, wage growth narrowed among sons
temporary and day workers. Change 31.6 9.7 30.1 -21.8 36.9 81.6
the easing of quarantine measures. However, Source: Ministry of Employment and Labor
12) In 2022, electricity bills increased by a total of 19.3 won/kWh, being raised in April, July, and October, and gas bills
rose by a total of 5.47 won/MJ, being raised in April, May, July, and October.
Decline in Housing Sale Prices and Lease-
Figure Ⅰ- 16. C
PI Inflation and Contribution by
hold Deposit Prices 13
Item
Ⅰ. Economic Trends
Agricultural & Marine Products Industrial Products
Housing sale prices dropped by 4.7 percent Electricity, Gas & Water Supply Services
Consumer Price Index CPI Excluding Food & Energy
throughout the year, sustaining a declining
(%, %p) (%, %p)
trend following June due to a rise in interest 6 6
5.1
rates and weakened expectations for housing 5 5
1. Real Economy
price increases.13) By region, the Seoul metro- 4 4
politan area significantly decreased, centered
3 2.5 3
on certain neighborhoods14) that experienced a
2 1.5 2
substantial growth margin in 2021. As for the
1 0.4 0.5 1
rest of the country, amid heightened down-
0 0
ward trends in Daegu, Daejeon, and Sejong,
-1 -1
most other cities also saw a declining trend. 2018 2019 2020 2021 2022
13) Housing sale prices dropped by 14.3 percent throughout the year based on the nationwide transaction-based price
index (based on sale prices of apartments and houses).
14) In 2021, housing sale prices in Siheung and Uiwang in Gyeonggi-do and in Yeonsu-gu in Incheon increased sub-
stantially, by 30.4 percent, 30.0 percent, and 34.7 percent, respectively, due to expectations surrounding a met-
ropolitan transportation network (GTX, Great Train eXpress), but in 2022, prices in those areas declined by 10.4
percent, 12.7 percent, and 15.0 percent, respectively (compared to the last survey dates of the previous periods).
15) Leasehold deposit prices dropped by 9.4 percent throughout the year based on the nationwide transaction-based
price index (based on leasehold deposit prices for both apartments and houses).
16) Current account: +59.7 billion dollars in 2019 → +75.9 billion dollars in 2020 → +85.2 billion dollars in 2021 → +29.8
billion dollars in 2022.
dustry. The services account deficit narrowed
14 Figure Ⅰ- 17. C
urrent Account
owing to the robust transport account, sup-
ported by a high level of overseas freight rates, Goods Services
Primary Income Secondary Income
while the primary income account surplus
Current Account
expanded, led by a decline in dividend income (100 million dollars) (100 million dollars)
1,200 1,200
300 300
Exports on a customs clearance basis stood
at 683.6 billion dollars, maintaining their re- 0 0
growth thanks to the alleviation of supply Chemical Products 57.0 <6.0> 63.1 <9.3>
disruptions and to robust sales of eco-friendly Machinery Products 10.5 <8.9> 0.3 <8.4>
Ships 32.9 <8.2> 5.1 <8.1>
vehicles, and those of petroleum products also
Total Exports 1)
25.7 [6,444] 6.1 [6,836]
rose substantially due to the continued high
Note: 1) Figures in square brackets are the total amount of exports (in
levels of energy prices. hundred millions of USD).
Sources: K
orea International Trade Association, Korea Customs
Service
Sharp Rise in Imports of Goods
17) Top three highest annual exports: (1) 683.6 billion dollars in 2022, (2) 644.4 billion dollars in 2021, (3) 604.9 billion
dollars in 2018.
record high for two consecutive years, owing
Table Ⅰ- 7. Imports by Major Item 15
to a surge in energy imports.18) Imports of
(%)
raw materials surged, led mainly by crude oil, 2021 2022
Ⅰ. Economic Trends
gas, and coal, affected by the global energy % % Share % % Share
supply problem. Imports of capital goods and Change of total Change of total
Crude Material & Fuel 46.7 <49.2> 30.1 <53.8>
consumer goods also increased, centered on
Energy 54.2 <18.3> 69.7 <26.1>
electric and electronic machinery, and grains
Capital Goods 20.2 <34.6> 7.5 <31.3>
1. Real Economy
and direct consumption goods (food and bev-
Electric·Electronic
erages), respectively. 21.5 <20.7> 13.4 <19.8>
Machinery
Machinery·Precision
20.9 <11.4> -1.9 <9.4>
Equipment
Continued Services Account Deficit
(Semiconductor
Manufacturing 50.1 <4.3> -10.6 <3.2>
The margin of services account deficit re- Equipment)
mained at a similar level to 2021, registering Consumer goods 18.3 <16.2> 9.1 <14.9>
5.5 billion dollars, mainly attributable to Total Imports1) 31.5 [6,151] 18.9 [7,314]
Note: 1) Figures in square brackets are the total amount of imports (in
special factors related to the pandemic.19) The
hundred millions of USD).
transport account surplus greatly widened, Sources: K
orea International Trade Association, Korea Customs
Service
boosted by continued rising freight rates fol-
lowing last year. The travel account deficit
remained below the
Figure Ⅰ- 18. Services Account
pre-pandemic level due to a continued
contraction in overseas travel by domestic Manufacturing Services Transport
Travel Construction Services
residents. The deficit in the manufacturing
Other Services1) Services
services account was similar to that in the (100 million dollars) (100 million dollars)
200 200
0 0
18) Past four years imports of energy: 108.6 billion dollars in 2019 → 73.0 billion dollars in 2020 → 112.6 billion dollars in
2021 → 191.0 billion dollars in 2022.
19) Service account: -26.8 billion dollars in 2019 → -14.7 billion dollars in 2020 → -5.3 billion dollars in 2021 → -5.5 bil-
lion dollars in 2022.
20) For detailed information on regional economic trends in 2022, see the Regional Economic Report (Quarterly) pub-
lished by the Bank of Korea, such as the March 2022 issue, June 2022 issue, September 2022 issue, and Decem-
ber 2022 issue.
production grew across all regions, led by food
16 Table Ⅰ- 8. Major Indicators by Region1)p
services & accommodations, and transport &
warehousing, thanks to a rise in face-to-face Seoul
Dong Chung Dae Gang
Metro Honam Jeju
activities due to the lifting of social distancing nam cheong gyeong won
politan
measures. Production
In terms of domestic demand trends,21) pri- Manufacturing Production
3.7 3.2 -0.5 0.0 -0.7 6.0 1.4
Index2)
vate consumption on a retail sales index basis
Services production index2) 4.9 4.9 4.2 3.5 3.0 5.5 8.6
dropped across all regions, except for in the
Demand
Dongnam region, due to a rise in prices and
Retail Sales Index2) -0.2 0.7 -0.9 -1.5 -0.4 -0.6 -0.1
interest rates. The Business Survey Index (BSI)
Facilities Investment BSI 3)
97 92 95 94 92 94 97
for facilities investment declined across all re-
Area of New Construction2) -21.5 2.2 -14.8 -26.7 -21.2 -16.1 9.3
gions, except for in the Jeju region, affected by Exports4) 2.5 9.5 4.9 12.5 10.2 0.7 -13.9
the uncertainty surrounding the global econo- Employment
my, thereby falling short of the reference value Changes in Number of
55.7 4.1 8.2 0.5 6.2 0.8 1.9
of 100. In terms of construction investment, Employed Persons5)
Unemployment Rate 3.0 3.1 2.3 2.9 2.7 3.2 2.1
due to sluggish housing demand, the total
Prices
area of new construction projects decreased
CPI2) 4.8 5.0 5.5 5.4 5.5 6.0 5.9
across all regions, except for in the Dongnam
Housing Sales Prices6) -6.5 -3.8 -3.6 -1.2 -4.2 0.5 -0.2
and Jeju regions. Exports rose at a slower pace
Housing Leasehold
across most regions compared to the previous -8.0 -3.2 -4.2 -1.6 -5.0 -0.3 0.0
Deposit Prices6)
year, influenced by sluggish global demand.
Notes: 1) T he Seoul metropolitan region includes Seoul, Incheon,
The Jeju region witnessed a decline in exports, and Gyeonggi-do(in case of Facilities Investment BSI, Seoul
centered on agricultural products and semi- is excluded). The Dongnam region includes Busan, Ulsan,
and Gyeongsangnam-do. The Daegyeong region includes
conductors. Daegu and Gyeongsangbuk-do.
In terms of employment conditions, the 2) Year-on-year rates of change.
3) Base = 100.
number of persons employed increased across 4) Customs-clearance basis, year-on-year rates of change.
all regions. Unemployment rates also main- 5) Year-on-year change (10,000 persons).
6) R
ates of change compared with the last months of previous
tained a low level across most regions. year.
Amid a continued rise in the prices of pe- Sources: B
ank of Korea, Statistics Korea, Ministry of Land,
Infrastructure, and Transport, Korea Customs Service,
troleum products, consumer prices recorded Korea Real Estate Board
a high growth rate across all regions, as the
prices of processed food and dining-out costs
saw growth expand, stemming from an in-
crease in international food prices, in addition
to a hike in electricity and gas charges.
In the meantime, housing sale prices and
leasehold deposit prices shifted to a decline
across most regions, led by the Seoul metro-
politan area and other cities.
21) Trends in regional consumption, facilities investment, and construction investment are estimated using retail sales
indexes, the facilities investment BSI, and the total area under new construction.
2. Financial and Foreign Figure Ⅰ- 19. M
ajor International Interest Rates
17
Exchange Markets and EMBI+ Spread
Ⅰ. Economic Trends
U.S. Government Bond Yield (10-year)
German Government Bond Yield (10-year)
-2 -1
13 16 19 22 22 .1 7 12
the European Central Bank (ECB),25) showing 3) JP Morgan EMBI+ (Emerging Markets Bond Index Plus).
Sources: Bloomberg, JP Morgan, Markit
a similar trend to that in the U.S.
22) In 2022, the U.S. Federal Reserve raised its policy rate by a total of 425 bp over seven occasions, starting with an
increase of 25 bp at the March FOMC meeting. In particular, from June to November, it raised the policy rate by 75
bp over four consecutive meetings.
23) In particular, market expectations for further U.S. interest rate hikes rose significantly when Federal Reserve Chair-
man Jerome Powell reaffirmed price stability as a priority at the Jackson Hole Economic Policy Symposium, held
on August 26.
24) Consumer price inflation in the euro region rose year-on-year from 7.4 percent in March to 10.6 percent in October.
25) At the July Monetary Policy Committee meeting, the ECB initially raised the policy rate by 50 bp in 2022 and raised
it again by a total of 250 bp over four occasions throughout the year.
The Emerging Markets Bond Index Plus
18
(EMBI+) spread soared immediately after
Russia’s invasion of Ukraine, but gradually
stabilized over time. Later, it fluctuated in line
with changes in expectations of major coun-
tries’ monetary policy tightening, and from
November onward, it dropped due to the sta-
bilization of U.S. inflation26) and the easing of
China’s zero-COVID policy.27)
26) Consumer price inflation in the U.S. dropped year-on-year from 9.1 percent in June to 6.5 percent in November.
27) On November 10, Chinese President Xi Jinping instructed that efforts should be made to minimize the impact of
COVID-19 policy on the economy, and Chinese health authorities later announced a series of measures to ease
restrictions, such as shortening the quarantine period, reducing PCR test requirements, and lifting lockdowns in
high-risk areas.
28) In October, the U.S. consumer price inflation year-on-year stood at 7.7 percent, below market expectations of 7.9
percent (November 10).
appreciated against the euro and the yen by 6.3
Figure Ⅰ- 21. USD per EUR and JPY per USD
19
percent and 13.9 percent, respectively. It ex- Exchange Rates
hibited a considerably strong tendency against
Ⅰ. Economic Trends
USD per EUR (left, inverted) JPY per USD (right)
the euro, affected by intensified concerns (USD per EUR) (JPY per USD) (USD per EUR) (JPY per USD)
over an economic slowdown in the euro area 0.9 160 0.90 160
29) At the July Monetary Policy Committee meeting, the ECB raised the policy rate by 50 bp, and again at the Septem-
ber and October meetings by 75 bp.
30) The Ministry of Finance in Japan announced that it conducted foreign exchange intervention worth around 6.3 tril-
lion yen in October (October 31).
31) At the December Monetary Policy meeting, the Bank of Japan expanded the variation range of 10-year government
bond yields from ±0.25 percent to ±0.50 percent (December 20).
of an adjustment in the pace of monetary
20
tightening in major countries. Stock prices
dropped due to concerns over an economic
slowdown resulting from monetary policy
normalization in major economies, grow-
ing geopolitical risk in Ukraine, and China’s
COVID-19 lockdown measures. Meanwhile,
deposit-taking at banks saw growth contract
significantly, particularly in money market
deposit accounts. In terms of bank lending,
corporate loans increased substantially due
to growing corporate demand for working
capital stemming from a surge in raw material
prices, and a rise in bank lending as a result of
deteriorated conditions for the issuance of cor-
porate bonds, while household loans shifted
to a decline, owing to a rise in lending rates, a
slowdown in housing transactions, and tight-
ened lending regulations.
29) At the July Monetary Policy Committee meeting, the ECB raised the policy rate by 50 bp, and again at the Septem-
ber and October meetings by 75 bp.
30) The Ministry of Finance in Japan announced that it conducted foreign exchange intervention worth around 6.3 tril-
lion yen in October (October 31).
31) At the December Monetary Policy meeting, the Bank of Japan expanded the variation range of 10-year government
bond yields from ±0.25 percent to ±0.50 percent (December 20).
32) The U.K Cabinet, led by Prime Minister Liz Truss, announced a large-scale tax cut plan that included the abolition
of the top bracket of income tax and the withdrawal of a plan to raise corporate taxes (September 23). As the an-
nouncement triggered severe turmoil in U.K financial markets, such as a steep rise in government bond yields and
a plunge in the British pound, the aforementioned tax cut plan was withdrawn and Liz Truss resigned as prime min-
ister (October 20).
the domestic PF-ABCP market instability in
Figure Ⅰ- 22. Major Market Interest Rates 21
October, 33) the volatility of those bonds ex-
panded significantly and eventually recorded 3-year KTBs (left) 3-year AA- Corporate Bonds (left)
Ⅰ. Economic Trends
91-day CPs (left) 91-day MSBs (left)
its peak for the year. Since then, the yield on
Base Rate (left) Term Spread (right)1)
3-year Treasury bonds plummeted owing to (% per annum) (%p) (% per annum) (%p)
porate bond spread over the Treasury bond 0.0 -1.0 0.0 -1.0
13 16 19 22 22.1 7 12
yield 35) widened greatly, affected by the ex-
pansion of interest rate volatility, continued Note: 1) Yields difference between 3-year KTBs and the Base Rate.
Sources: Korea Financial Investment Association, Bank of Korea
geopolitical risk in Ukraine, the crowding-out
effects among credit bonds stemming from a
large-scale issuance of bank bonds and Korea
Electric Power Corporation (KEPCO) bonds,36)
as well as market instability after October,
and then narrowed slightly following market
stability measures.
Meanwhile, short-term market interest
33) As Gangwon-do applied for the corporate rehabilitation of the Gangwon Jungdo Development Corporation (GJC),
the PF-ABCP, which was issued by the special purpose company Iwon Jeil Cha based on loans taken out by the
GJC, was listed as being in default (October 4). As a result, credit risk aversion heightened, particularly in the CP
market, and subsequently market volatility spiked.
34) On October 23, the government announced the bond market stabilization fund (worth 20 trillion won), the corpo-
rate bond and CP purchasing program by policy financial institutions (worth 16 trillion won), liquidity support for
securities firms through securities finance corporations (worth 3 trillion won), guaranteed support for real estate PF
businesses (worth 15 trillion won), and the purchasing program for PFs backed by securities firms (worth 1.8 trillion
won). On October 27, the Bank of Korea announced the expansion of the range of eligible collateral for lending
facilities and eligible securities, a purchase of RPs for short-term financial market stabilization (worth 6 trillion won),
a purchase of RPs from institutions contributing to the bond market stabilization fund (worth 2.5 trillion won). For
detailed information on market stabilization measures by the Bank of Korea, see B. Financial Market Stabilization
Measures under Section 3, Chapter II.
35) The 3-year corporate bond spread over the Treasury bond yield (rated AA-) widened from 61 bp at the end of De-
cember 2021 to 81 bp at the end of June, to 109 bp at the end of September, to 179 bp at the end of November
2022, and then narrowed to 148bp at the end of December 2022.
36) In 2022, the net worth of issued credit bonds rated AAA, including Korea Electric Power Corporation (KEPCO)
bonds and bank bonds, was a total of 53.1 trillion won, accounting for 105 percent of the net issuance of overall
credit bonds, worth 50.6 trillion won. This had a crowding out effect on demand for other credit bonds with rela-
tively inferior credibility.
rates also soared in 2022. The yield on 91-day
22
Monetary Stabilization Bonds rose, reflecting
Base Rate hikes, and the yield on 91-day CPs
rated A1 increased steeply, influenced by the
PF-ABCP market instability, and then de-
clined slightly as of year-end 2022.
Interest rates on bank loans and deposits
(based on newly taken deposits) displayed a
sharp increase, reflecting a rise in market in-
terest rates.37)
cerns over a slowdown in the global economy. 3500 1400 3200 1400
37) In December 2022, lending rates stood at 5.56 percent, up by 2.31 percentage points from 3.25 percent in Decem-
ber 2021. In terms of borrower types, corporate lending rates and household lending rates rose by 2.42 percentage
points and by 1.94 percentage points, respectively. Meanwhile, deposit rates were 4.22 percent, up by 2.52 per-
centage points from 1.70 percent in December 2021.
concerns over continued monetary policy
23
tightening in major countries and the deteri-
oration of economic indicators in the U.S. and
Ⅰ. Economic Trends
China.
T he KOSDAQ index ex hibited similar
trends to the KOSPI.
accounts to time deposits due to a steep rise 2018 2019 2020 2021 2022
in time deposit rates, overall deposit-taking at Deposits at Banks1) 91.6 106.3 188.4 198.5 107.4
Demand Deposits 10.9 65.9 189.3 131.0 -104.9
banks diminished owing to weaker incentives
Time & Savings
for banks to raise funds, stemming from a 72.2 48.3 -14.4 41.8 200.1
Deposits
slowdown in the growth margin of lending. Marketable
7.8 -14.6 14.6 33.9 13.6
Deposits of non-banking institutions, such Instruments2)
Deposits at Asset
as credit cooperatives, showed a rise, mainly Management 53.8 98.6 42.2 93.9 44.4
led by time deposits. Companies3)
Deposit-taking by asset management com- Deposits at Mutual
8.6 6.1 13.2 23.3 17.6
Savings Banks
panies saw its margin of growth narrowing
Deposits at Credit
39.7 60.7 50.1 69.4 86.0
due to outflows of funds from stock-type and Cooperatives4)
bond-type funds, affected by a drop in stock Notes: 1) Figures exclude deposits from banks, government, and non-
residents.
prices and interest rate hikes at home and
2) CDs, RPs, cover bills, and bank debentures.
abroad.38) 3) D
erivatives, real estate, indirect special-assets, mixed-asset
funds, and balanced funds.
4) Mutual credit companies, community credit cooperatives,
Household Lending Shifts to a Decline Amid and credit unions.
Sources: Bank of Korea, Korea Financial Investment Association
Steep Rise in Corporate Lending
38) In 2022, in terms of deposit-taking by asset management companies for each fund type, bond-type funds and
stock-type funds witnessed outflows of 11.1 trillion won and 4.6 trillion won, respectively. On the other hand, MMF
and new funds marked inflows of 16.0 trillion won and 48.0 trillion won, respectively.
tal, driven by a surge in raw material prices,
Table Ⅰ- 11. Loans by Financial Institutions
24
large corporate loans exhibited a substantial (changes in amounts during the period)
increase, as demand for financing among (trillion won)
large corporations was concentrated on bank 2018 2019 2020 2021 2022
loans due to worsened conditions for issuing Corporate Loans 81.8 90.2 169.6 171.5 198.0
corporate bonds. Small and medium-sized Banks 46.7 47.7 110.8 94.1 114.9
enterprise (SME) loans also increased, cen- Large Corporations 6.9 -1.8 20.9 9.0 44.3
tered on loans for working capital on the back SMEs 39.8 49.4 90.0 85.1 70.6
Non-Banks1) 35.1 42.5 58.8 77.4 83.1
of continued financial support in the wake of
Household Loans 2)
76.8 58.3 128.7 123.5 -7.8
COVID-19.39)
Deposit Banks 52.4 54.6 82.2 60.2 -7.5
In the meantime, household loans by banks,
(Mortgage Loans) 30.1 39.7 49.9 45.7 14.6
including policy mortgage loans, shifted to a
(Other Loans) 22.4 14.9 32.2 14.6 -22.1
decline, affected by a contraction in demand
Non-Bank Depository
6.8 -4.5 7.6 27.6 -6.0
for lending due to lending rate rises and a Institutions3)
slowdown in housing transactions, as well Other Financial
17.5 8.1 39.0 35.7 5.7
Institutions4)
as the government’s tightening of household
Notes: 1) Based on loans by mutual credit companies, credit unions,
lending regulations.40) community credit cooperatives, mutual savings banks.
By lending type, mortgage loans saw their 2) Based on household credit statistics.
3) M
utual credit companies, credit unions, community credit
margin of growth narrow significantly, and cooperatives, mutual savings banks, trusts, and postal
39) Loans provided by financial institutions in relation to COVID-19 financial support were originally scheduled to end
at the end of September 2022. Early this year, however, the government implemented additional financial support
measures by extending the maturity of the aforementioned loans by up to three years and by delaying their repay-
ment by up to one year (press release from the Financial Services Commission on September 27, 2022).
40) In accordance with the Household Debt Management Measures announced on April 29 and October 26, 2021, the
second phase of the individual borrower-level DSR has been applied since January 2022 to individual borrowers
with total loans exceeding 200 million won, and the third phase of the individual borrower-level DSR has been ap-
plied since July 2022 to individual borrowers with total loans exceeding 100 million won. Meanwhile, the regulation
that limited one’s credit limit on bank loans to be within one’s annual income, effective August 2021, was abolished
in July 2022.
exchange rate fluctuated around 1,200 won,
Figure Ⅰ- 24. E xchange Rate, Nominal Effective
25
and then surged to 1,440 won in October, af- Exchange Rate Index for Korea1)
fected by a contraction in investor sentiment
Ⅰ. Economic Trends
USD/KRW (left)
resulting from the Russia-Ukraine war and Nominal Effective Exchange Rate Index for Korea (right)
6.5 won, respectively, compared to 5.2 and 3.6 Notes: 1) Average of the intra-day highest rate minus the intra-day
lowest rate.
won in 2021. 2) A
verage of the absolute value of the day closing rate
minus the previous day closing rate.
Source: Bank of Korea
41) The U.S. Dollar Index (DXY), which measures the value of the U.S. dollar relative to six major currencies (the euro,
Japanese yen, British pound, Canadian dollar, Swedish krona, and Swiss franc), increased from an average of 96.9
in the first quarter to an average of 108.3 in the third quarter.
Sustaining Stability in the Foreign Currency
26 Figure Ⅰ- 26. Foreign Exchange Swap Rate
Money Market
Arbitrage Opportunities (3-month)1)
Foreign Exchange Swap Rate (3-month)
In 2022, while the USD/KRW exchange rate
KRW/USD Interest Rate Differential (3-month)
exhibited significant volatility along with a (%, %p) (%, %p)
surge in the U.S. dollar, the foreign exchange 4 4 4
42) A foreign exchange swap is a transaction through which two parties exchange different currencies at an agreed
exchange in the present time . They then re-exchange the principals after a set period at the forward exchange
rate that was determined when the relevant contract was concluded. The foreign exchange swap rate is expressed
as the annualized rate (%) of the difference between the forward and spot exchange rates as against the spot ex-
change rate: {(Forward exchange rate - Spot exchange rate) / Spot exchange rate}.
43) In March 2020, amid heightened concerns over the spread of COVID-19, the premiums on short-term foreign cur-
rency borrowings by domestic banks was at the 67 bp level, up 64 bp compared to the average of 2019. However,
in November 2022, it remained at a mere 19 bp, up by 17 bp compared to the average of 2021.