BANGKOK — Attending the IMF Annual Meetings in Bangkok, Bank of Korea (BOK) Governor Shin Hyun-song warned against the deepening K-shaped polarization in the South Korean economy and emphasized the critical role of monetary policy management.

Participating in a panel discussion titled "Global Perspectives" hosted by CNN on October 14 (local time) in conjunction with the IMF Annual Meetings, Governor Shin evaluated the country's polarization, stating, "Korea is indeed witnessing a very distinct K-shaped economic pattern."

"Korea is currently at the intersection of two major contrasting trends," Shin diagnosed. "One is the AI and massive investment boom, while the other—acting in the exact opposite direction—is the Middle East conflict."

He noted that, "In terms of real economic activity, the positive impact of the AI investment boom is outweighing the negative effects of the Middle East conflict." However, he added, "On the inflation front, both factors are acting in the direction of driving prices higher."

"From a central bank perspective, the most important thing is to always keep in mind that inflation deals the hardest blow to low-income groups," Shin stressed. "This is the core reason why we must stabilize prices and why executing monetary policy correctly is of absolute importance."

Reiterating his commitment, he pledged, "We will steadfastly uphold the price stability principle, maintaining our consumer price inflation target of 2%."

Evaluating Downside Risks and Financial Stability

When asked whether the Korean economy could face downside risks despite its continued export boom, Shin answered, "It depends on how long large-scale AI investments will last."

"Forecasting institutions are looking out toward 2030, expecting over $1 trillion in investments to be made over the next three to four years," Shin projected. "This will significantly boost and vitalize global trade, ultimately having a positive impact on the Korean economy as well."

Mentioning that Asian nations like Korea and Thailand experienced the late-1990s Asian Financial Crisis, Shin remarked, "It is engraved in our DNA's lessons. That experience has had a decisive influence on our policy approach toward macroeconomic and financial stability."

He warned, "We must be able to control excessive leverage—namely, debt-fueled investments and market overheating—before they go too far. Responding belatedly after risks have accumulated is like bursting a bubble."

Regarding South Korea's financial market, Shin noted, "The Financial Vulnerability Index (FVI), with the second quarter of 1997—just before the Asian Financial Crisis—set at 100, currently stands at around 46, which is near its long-term average."

He concluded, "Because ensuring financial stability is one of the core mandates of the BOK, we are constantly monitoring this indicator and will ensure that the situation does not spiral out of control."

[Copyright (c) Global Economic Times. All Rights Reserved.]