SEOUL– South Korea’s private consumption growth is likely to slow due to high-flying inflation and rate hikes, the central bank said Thursday.
Concerns are growing that rising inflation and interest rates will continue to weaken private consumption, the Bank of Korea (BOK) stated in a report.
“Consumption of goods is expected to slow down due to weaker real purchasing power, depreciation in assets and the rise in borrowing costs,” the BOK reported.
“In the future, the global pace and magnitude of economic slowdown and rate hikes may further weigh on consumption growth,” the BOK added.
The BOK has hiked its benchmark interest rate by a combined 2.5 percentage points since August last year.
The central bank noted that the rising borrowing costs can weigh heavily on economically vulnerable households, in particular, and curb employment.
The fastest signs of shrinking consumption may come from durable goods, according to the BOK report.
Services recovered quickly from virus curbs, but the pace may slow to the norm.
But overseas consumption still has room for growth, the BOK said, citing a fast rise in overseas travel and possibilities of additional lifting of virus curbs and the expansion of air travel.
Source: Yonhap News Agency