Bank of Korea Governor Lee Chang-yong Addresses Impact of Middle East Conflict on Korean Exchange Rate and Prices

Bank of Korea Governor Lee Chang-yong, visiting the United States, said in a meeting with Washington correspondents on the 19th that the variable that will have the greatest impact on the Korean exchange rate and prices in the future is the conflict between the Middle East between Iran and Israel and that, unless the war escalates, there will be no major problems.

Bank of Korea Governor Lee Chang-yong will hold a meeting with correspondents near Washington, DC on the 19th. /Joint Washington Correspondents

Governor Lee, visiting the United States to attend the Spring General Meeting of the International Monetary Fund (IMF), said regarding the exchange rate instability caused today by the conflict between Iran and Israel: “It is a situation in which several uncertainties exploded immediately,” adding, “Iran’s attack on Israel and the US interest rate cut on monetary policy. “When data started to emerge showing that this was delayed more than expected, not only our country’s exchange rate but also many exchange rates in Asia. It showed weakness,” he said.

Governor Lee said: “Like Japan, we have reached a consensus that the current situation is that the rate of devaluation (of the won) is excessively rapid, and this view appears to have been shared at the meeting of finance ministers of Japan. Korea, the United States, Japan and the government also want to stabilize the exchange rate. “I’m starting to get in now,” he said. He continued: “There is a lot of uncertainty at the moment as the exchange rate, which had remained stable after the government intervention, was badly shaken by Israel’s counterattack against Iran, only to stabilize again when it news spread that the exchange rate would not change. intensify further.”

Governor Lee further said, “For a country like ours that consumes a lot of oil, the future direction is very uncertain depending on what happens in the Middle East. Fortunately, the prevailing opinion is that the war will not escalate further, and so it was wait and see how the situation develops.” “I think so,” he said. He said: “I don’t think there will be any big problems in terms of exchange rate management if the war does not expand further,” and “If the war does not expand, the price of oil will not increase significantly, and if something Since the blockade of the Strait of Hormuz will not happen, I think that the exchange rate will rise again.” “It will contribute a lot to stabilization,” he said: “I don’t think the economic growth or price forecasts we expected will deviate much, but it still seems difficult to predict.”

Meanwhile, regarding the Democratic Party of Korea’s request for a supplementary budget, Governor Lee called it a “short-sighted perspective.” He introduced that Korea’s national debt to gross domestic product (GDP) ratio is about 53% and said, “I think there are two problems with the idea that we should use this financing when the economy is difficult because we have much more fiscal space than other countries.” he did.

He said: “Right now (the government debt ratio) is 53%, but even if we maintain the current welfare system, if we think about the national debt that the government will have to spend due to aging, this number will rise to 70 . % or 90% within 20 years.” “Because it’s going to increase, it’s very short-sighted to just look at the current numbers and understand the solid state of the finances and say ‘there’s room,'” he said.

He also said: “Even if we use finances, rather than using them in general, we must use them sparingly, targeting and using them carefully to give priority to those who are truly in need.”

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