By Yoon Ja-young and Kim Hyun-bin

The year 2022 has had its ups and downs. Steeply rising interest rates caused turmoil in the financial markets, while the successful launch of the nation's first domestically developed space rocket boosted hopes that Korea will join the world's space powers in the near future. Here are the top 10 news items in business and finance that made headlines in 2022.

Bank of Korea (BOK) Governor Rhee Chang-yong bangs a gavel during this year's final rate-setting meeting at the central bank's headquarters in downtown Seoul, Nov. 24. Yonhap

Key rate hike increases household debt burden while banks benefit

The Bank of Korea (BOK) raised the key rate to 3.25 percent from 0.5 percent in slightly more than a year. Behind the hike is the global fight against inflation, triggered by stimulus measures to cope with the COVID-19 pandemic as well as energy crisis following the war in Ukraine. The U.S. Consumer Price Index (CPI) rose 9.1 percent from a year ago in June, which was the highest rise since 1981, and Korea also saw the highest level of inflation in more than two decades.

That prompted the U.S. Federal Reserve to end the era of the zero interest rate. Starting with a 0.25-percentage-point hike in March, it raised the key rate by 0.5 percentage point in May, taking a giant step of a 0.75-percentage-point hike in June, July, September and November. The BOK had to follow suit, raising its key rate successively in May, July, August, October and November. In July and October, the BOK took the unprecedented big step of a 0.5-percentage-point rate hike.

The steep rate hike dealt a blow to people who took out loans. The country's household debt had snowballed as more people invested in real estate, stocks and cryptocurrencies amid soaring asset prices fueled by ample liquidity, but they are suffering as the interest burden has doubled from a year ago, while asset prices have plummeted.

Meanwhile, the key rate hike enabled banks to reap record earnings. The aggregate net income of the country's four largest banking groups amounted to a record 13.85 trillion won in the first three quarters of this year.

Crown Prince Mohammed bin Salman of Saudi Arabia, right, talks with the heads of major Korean companies to discuss business cooperation in the kingdom at Lotte Hotel in downtown Seoul, Nov. 17. From left are Hanwha Solutions Vice Chairman Kim Dong-kwan, Hyundai Motor Group Chairman Chung Euisun, SK Group Chairman Chey Tae-won, Samsung Electronics Chairman Lee Jae-yong and Crown Prince Mohammed. Screenshot photo from Saudi Arabian state media SPA's homepage

Saudi crown prince meets chaebol heads

On Nov. 17, the heads of Korea's top business groups gathered at Lotte Hotel Seoul to meet Saudi Arabia's Crown Prince Mohammed bin Salman and seek more business opportunities in the $500 billion NEOM smart city project in the Middle Eastern country.

The crown prince held a tea meeting for one and a half hours with the chiefs of Korea's eight major conglomerates ― Samsung Electronics Chairman Lee Jae-yong, SK Group Chairman Chey Tae-won, Hyundai Motor Group Chairman Chung Euisun, and Hanwha Solutions Vice Chairman Kim Dong-kwan, CJ Group Chairman Lee Jay-hyun, Doosan Group Chairman Park Jeong-won, DL Group Chairman Lee Hae-wook, and Hyundai Heavy Industries (HHI) Group CEO Chung Ki-sun.

NEOM is a mega project to build a smart city in an area 44 times the size of Seoul, and a wide range of business opportunities is expected to open up in areas such as urban infrastructure, information technology (IT), and energy.

Samsung chief pardoned, promoted to chairman

Samsung Electronics Chairman Lee Jae-yong

On Oct. 27, Lee Jae-yong was appointed executive chairman of Samsung Electronics to better deal with external difficulties such as the global economic crisis.

The board of directors voted to appoint Lee as chairman to better ensure stability and improve decision-making processes. Lee, 54, received a presidential pardon in August. He was pardoned for bribing former President Park Geun-hye in 2017, but he still faces other charges for violating accounting rules and spreading false information to investors.

Lee faces a multitude of challenges as Samsung Electronics' operating profit declined 31.4 percent in the third quarter of this year, the first decline since 2019. During a luncheon with executives, Lee vowed to make bold investments in new technologies. He also stressed his focus on advanced chips, biopharmaceuticals, automotive and next-generation network technologies as future growth engines.

Stacks of containers are piled up at a port in Korea's southeastern city of Busan. / Yonhap

Trade deficit likely for the first time since 2008

Korea is projected to suffer a trade deficit this year. It will be the first annual trade deficit since 2008 when the country sustained a $13.27 billion deficit in trade amid the global financial crisis. The trade deficit this year is estimated at around $48 billion, with some estimating it can surpass $50 billion.

Behind the deficit is surging global energy prices triggered by the war between Russia and Ukraine. The money Korea spends to import oil, gas, and coal has been snowballing by more than 70 percent from a year ago.

Exports, which contribute to half of Korea's economic growth, meanwhile, have been contracting by the double digits recently, amid a global economic slowdown. Korea's major export items such as semiconductors are suffering from sluggish demand, while an economic slowdown in China, Korea's biggest trading partner, worsened the situation.

An official at Hana Bank checks bundles of dollars at its headquarters in Seoul, Dec. 5. Yonhap

Financial market in turmoil: Korean won and KOSPI tumble

The global interest rate hike to tame inflation led to financial market turmoil, where the won-dollar exchange rate soared, while the stock market collapsed. The aggressive key rate hike by the U.S. Fed led to the influx of global liquidity into the U.S. bond market. The dollar index, which represents the value of the greenback against a basket of six other currencies, surpassed 114 in September, the highest level since 2002. The won-dollar exchange rate, which stood at 1,188.8 won around the end of the last year, soared to 1,444.2 won in October.

As global liquidity pulled out of the Korean bourse, the main stock index, KOSPI, which closed at 2,988.77 on Jan. 3 this year, plunged 27.9 percent to 2155.49 at the end of September. Investor sentiment froze, and the daily transaction amount on the KOSPI fell to 4.8 trillion won on Dec. 19, falling below 5 trillion won for the first time in about three years. Investors' deposits in the stock market also contracted by around 40 percent, amid a pessimistic outlook on stocks.