New team, same old shtickTop economic policymakers have stepped into the game as relief pitchers. They stand on the mound with little show of urgency, raising concerns about their performance to save the fast-sinking economy. Hong Nam-ki, tapped as the deputy prime minister for economy and finance minister, in a press briefing upon appointment, said he disagreed with the talk of the Korean economy facing a crisis or recession, defying warnings from home and abroad.
The data on output, jobs, consumption and investment all point to a downturn. Moody’s Investors Service shaved the growth outlook for the Korean economy to 2.5 percent from the previous 2.8 percent for this year and gave an even more dismal figure of 2.3 percent for next year. Mainstay factory industries of automobile, shipbuilding and petrochemicals are underperforming their capacity due to slack demand. Choi Jun-yeong, chief executive of Kia Motors, in an email to employees said the company must strive to keep up viability and find ways to prevent the collapse of its supply chain. Kim Kwang-doo, vice chairman of the National Economic Advisory Council, in his Facebook page warned that the economy’s roots were shaking. Yet the new economic policy chief thinks otherwise.
The Korean economy is weighed down by structural and external problems, but the experiment of an untested trickle-up policy has made matters worse. Yet, the new economic team vows to uphold the current policy. Hong said he will do his best to generate growth through innovation and income increases. Kim Soo-hyun, the new policy chief, also made it clear that the existing policies will stay intact. He repeats his predecessor Jang Ha-sung, who claimed the economy was not in a crisis to defend his income-led growth policy. Hong argued that the minimum wage pace has already been moderated. But how can he talk so lightly when the minimum wage will go up by 29 percent over two years?
The market had expected fresh ideas and a push on the labor and regulation front from the new economic team. But they are oblivious to reality and obsessed about income-led growth, just like their predecessors. One positive note was that the Blue House made it clear that the commander in economic policymaking was the deputy prime minister. Hong and Kim both promised to listen to the voices of the field. It is urgent for the deputy prime minister to demonstrate a strong will and leadership to combat the current challenges. This is no time for casual talk and stubbornness. They have not been replaced to lessen the cacophony on policies, but to relieve the economy.