A matter of timingYoon Jeung-hyun, minister of finance and strategy, once again said that the government has no plan of implementing an exit strategy at the moment.
During a forum organized by the Korea Chamber of Commerce and Industry, Yoon stressed that the economy could once again retreat if the government ends its expansionary policy early - particularly if it does so before the economy shows a visible recovery.
Yoon added that the government will play an active role in fiscal and financial policy for the time being.
We share Yoon’s judgment on the economy as well as on macroeconomic policies.
The problem is that the debate on excessive liquidity in the market that was raised in May has not subsided. Some observers are still insisting that the money the government released into the market should be partially recovered, especially as the stock market rallies and real estate prices shoot up.
A report on changes in the economic environment and policy direction released on July 21 by the Korea Development Institute, a state-run research entity, makes such arguments.
In its report, the KDI noted that Korea’s economy could recover relatively earlier than other developed countries. The institution insisted that the government should at least make an attempt to recover the money it spent on various economic stimulus measures that were created after the financial crisis and, in essence, devise an exit strategy.
We believe the KDI’s concern and policy advice is fairly reasonable.
However, at this point we should make it clear that devising an exit strategy is one thing, but actually implementing it is an entirely different story. As the KDI pointed out, it is the duty of the government and the central bank to craft measures that will prevent future inflation ahead of time. But deciding when to implement the measures requires a high level of technical judgment that involves determining the appropriate timing after closely monitoring the economic situation.
The government has concluded that this is not the time, and we agree with that decision.
This is not the time to argue about an exit strategy. Rather, the nation must strengthen its domestic economy.
We should table discussions on macroeconomic policies for the moment and focus on creating microeconomic policies that will help money flow into productive areas and help companies increase their investments. It is also important for the government and the Bank of Korea to work closely together in sending a consistent message.