Bank of Korea Gov. Lee Ju-yeol said the Korean economy needs both monetary and fiscal easing, should it recover its growth momentum.

“Monetary policy alone cannot help recover the economic growth, and we need fiscal easing as well,” Lee said in a parliamentary audit by the Strategy and Finance Committee.


His comments came as the prospect for the Korean economy in the second half turned bleaker. The Korea Economic Research Institute recently revised down the economic growth outlook for the second half of 2016 to 1.7 percent from the 1.9 percent projection made three months earlier, citing gloomier outlook for the world economy.

Lee said despite the need for fiscal easing, the government seems to put more strength in maintaining the fiscal health than in expanding fiscal policy to buttress the economic recovery.

On inflation, asked by Rep. Choi Gyo-il of the Saenuri Party, Lee said he expects annual consumer inflation to be at 1 percent this year.

Lee’s projection of inflation has been cut by 0.1 percentage point from the previous 1.1 percent projection announced in July.

On Oct. 13, the central bank is to announce a revised projection for Korea’s economic growth rate and consumer inflation for 2017.

On the possibility of the Federal Reserve’s raising the interest rate, Lee said he shared the market’s forecast that there would be a rate hike within this year.

On growing household debts in Korea, Lee said, “There is little chance that it could generate a systemic risk but the bank will seek close cooperation with the government to counter undesirably fast growth of household debts.”

Meanwhile, Lee remained cautious on a redenomination of the local currency, saying the local and global economy are seeing increased uncertainties.

Since 2004 when the government decided to delay discussions on the issue, the BOK has not carried out any task on a redenomination of the Korean won.

Finance Minister Yoo Il-ho also had said in June that the ministry has no plans for a redenomination, noting it could cause great confusion.

By Kim Yoon-mi (yoonmi@heraldcorp.com)