new year speech january 2, 2019 juyeol lee governor the bank of korea dear fellow members of the bank of korea! today we start our first tasks of 2019, filled with new hope and resolve. i would like to begin by expressing my heartfelt gratitude to all of you, for so faithfully carrying out your duties throughout the last year. the korean economy went through some difficult times last year, due to the heightening of uncertainties at home and abroad. volatility in the international financial markets increased frequently, in line with the worsening of the global trade environment and with the financial instabilities suffered by some emes amid the series of policy rate hikes by the us federal reserve. thanks to our strong international credit standing we were fortunate enough to maintain stability in korean markets overall, but we still had to remain vigilant. looking at the real economy, the rate of growth did not deviate far from its potential level, but employment remained sluggish and economic agents ’ sentiments weakened. the growth in household debt continued to outpace that in household income, leading to concerns that this could undermine financial stability. in these circumstances the bank of korea maintained the degree of its monetary policy accommodation, mindful of the diverse risk factors that could negatively affect the real economy, until in november it then raised the base rate by 25 basis points in consideration of the possibility of the financial imbalances worsening. 1 / 8 dear members of the bank of korea! this year the korean economy appears likely to maintain a pace of growth similar to last year ’ s. but there still seems to be a tough road ahead of us, both at home and abroad. there are possibilities that the uncertainties about the monetary policy normalization in the us and the us - china trade conflict could lead international financial market volatility to increase and undermine global economic growth. with its high degree of capital market openness and heavy dependence on external trade, korea could be particularly vulnerable to the impacts of changes in external risks. we will need to be mindful of and prepared for these possibilities. we should also pay close attention to the fact that the growth potential of the korean economy is continually weakening. the productivity growth in our major industries is slowing, while accumulating capital through investment has become difficult as our economy now enters its mature stage. the reduction in our workingage population in consequence of low birthrate and aging population is also weakening our growth potential. i think the concerns about our economy ’

, the pressures of global regulations and goal attainment related to environmental issues will only intensify. in line with this, the republic of korea has made a commitment to reduce greenhouse gas emissions by 40 % from 2018 levels by 2030, and to increase official development assistance ( oda ) for green projects. while our economy may face challenges during this transition, when we fulfill our responsibilities as members of the international community, we will then be able to actively demand that advanced countries, which have historically emitted significant amounts of greenhouse gases during their development process, fulfill their technological and financial support responsibilities to developing countries. third, tackling climate change presents both risks and opportunities. the covid19 pandemic has caused a global health crisis, but it has also presented unprecedented growth opportunities for bio - tech companies such as biontech and moderna, who have successfully developed vaccines. the climate change crisis will also present opportunities for companies that are prepared. global climate venture companies like opower in the u. s., a provider of big data for energy conservation, or like climateworks in switzerland, which converts carbon dioxide into solid carbon for sale, or like rubicon, also in the u. s., which creates resource circulation platforms, are all experiencing rapid growth. globally, climate tech investment funds have grown threefold in two years, reaching us $ 45 billion in 2021. innovative technologies in the fields of environment, energy, agriculture, and geographic observation are being commercialized at an astonishing pace. this will provide challenging business opportunities for the young itsavvy generation in korea. the bank of korea is also making multifaceted efforts in response to climate change. we are continuously expanding research and conducting stress tests to evaluate the 2 / 4 bis - central bankers'speeches impact of climate change on financial institutions. this includes the development of stress test models. 5 additionally, we are actively expanding our efforts in foreign exchange reserve management by incorporating esg investments, along with other initiatives, to address climate change. moving forward, we intend to explore market creating measures to promote green finance and policy tools to alleviate the transition burden on small and medium - sized enterprises ( smes ) in collaboration with financial authorities. supporting smes in green finance is an important policy task because if smes fail to transition smoothly to environmentally friendly practices, large corporations connected through export supply chains will also find it difficult to evade global environmental regulations. however, these smes face difficulties in benefiting from green finance due to their low credit