Governor Lee Chang-yong, on the diagnosis of the building boom downturn and export situation: emphasizes independent monetary policy

South Korean Bank Governor Lee Chang-yong recently diagnosed the current state of the Korean economy by evaluating construction sector prosperity and export performance. He stated at the full meeting of the National Assembly’s Finance and Economy Planning Committee that this year’s economic growth rate is expected to improve significantly compared to last year, but the downturn in the construction sector is more severe than anticipated.

Governor Lee mentioned that South Korea’s economic growth rate was 1.0% last year and expects a higher growth rate this year. Regarding the construction sector, he explained that due to excessive expansion in the real estate market in recent years, the industry’s poor conditions persist, requiring structural adjustments, and emphasized that this is a time-consuming issue.

Additionally, he shared his view on why the U.S. Federal Reserve is not rushing to cut the benchmark interest rate, believing that the background lies in the slow decline of inflation rates compared to expectations. In the past few years, rising prices have not stabilized as quickly as anticipated, affecting monetary policy decisions.

Regarding the reversal of the U.S.-South Korea benchmark interest rate, he clarified that South Korea’s monetary policy is not necessarily directly influenced by U.S. interest rate trends. This means that policy decisions will be made independently, considering factors such as domestic price levels and financial conditions.

Such economic trends are likely to impact future policy decisions in South Korea. In particular, the necessity of structural adjustments in the construction sector and whether export improvements can be sustained will be closely watched, and are expected to become variables that determine the medium- to long-term economic growth trajectory.