Deputy Prime Minister and Finance Minister nominee Choi Kyung-hwan on Tuesday called for bold measures to sustain the country’s economic growth.
Describing the country’s economic recovery as “slow,” Choi said more “drastic measures” are required to continuing strengthening Asia fourth-largest economy.
“Many of the advanced countries in the world are already mobilizing their forces, boosting their economies through quantitative easing and other nontraditional methods. ... We can no longer rely on old and passive polices to deal with the current economic challenges,” the nominee said during his confirmation hearing at the National Assembly. He added that there was a need for additional government spending.
The comments come as the nation’s central bank is expected to lower its economic growth forecast this week as tepid domestic consumption and a strong local currency fuel fears over the economic turnaround.
As expected, Choi also proposed stimulus measures, such as easing regulatory limits for mortgage lending, saying that he would focus on improving the sluggish housing and finance markets.
To boost housing sales, he suggested revising the current loan-to-value and also debt-to-income ratio rules for mortgage loans, which have remained unchanged for more than a decade.
The LTV rate, a gauge used by banks to determine the maximum amount of a mortgage based on the price of the property, is currently set at 50 percent for Seoul and surrounding metropolitan areas, and 60 percent in rural regions. And the ceiling on the DTI ratio is 50 percent for those buying a property in Seoul and 60 percent for the surrounding metropolitan area.
The three-term Saenuri Party lawmaker indicated that both LTV and DTI limits needed to be eased.
By expanding mortgage lending to homebuyers, he said, the housing market would start to pick up, with more people buying homes, which in turn would push up housing prices.
Some lawmakers, however, questioned his tactic, pointing out that easing LTV and DTI regulations in the longer term could further strain household debt, which surpassed 1,000 trillion won ($936 billion) at the end of 2013.
But Choi argued that many households were already utilizing nonbank mortgages despite high interest and unsecured services, so enabling greater bank lending would allow more home buyers to receive low-interest and longer-term loans from a bank.
Asked about possible tax hikes, the nominee admitted that it would be difficult for the government to meet its 2014 tax revenue target due to signs of a growth slowdown.
However, he pledged that he would not seek a tax increase as an economic stimulus measure.
Last month, President Park Geun-hye tapped the third-term lawmaker of the ruling party for the post of finance minister in a Cabinet reshuffle.
By Oh Kyu-wook (email@example.com