Korea finance minister optimistic, doesn't expect repeat of 1997

Economy

Published: 06 Oct. 2022, 19:04 Updated: 06 Oct. 2022, 19:42

Korea finance minister optimistic, doesn't expect repeat of 1997

Finance Minister Choo Kyung-ho answers questions by reporters on the latest issue at the Finance Ministry in Sejong on Thursday. [NEWS1]

Finance Minister Choo Kyung-ho is concerned about 2023 growth as he remains generally sanguine and doesn't anticipated stagflation or a repeat of the 1997 crisis.

"What we are concerned with currently is next year's economic growth," Choo said on Thursday in a meeting with reporters.

He said he expects the economy to grow around 2.6 percent this year, in line with estimates. For next year, he is worried about slower growth in advanced countries due to financial market instability and a slow recovery in China.

The finance minister brushed off the possibility of Korea entering a major crisis and insisted that concerns about high inflation and low growth are overdone.

"According to international organizations and credit rating agencies at home and abroad that I have met, the possibility of another financial crisis reoccurring is low," Choo said. "While some say that we are now at entering a period of stagflation, I think that expression is a bit excessive."

"Although we expect consumer prices to peak in October, for the time being, consumer prices are at a high level and will likely remain there as service prices, including the cost of dining out, and public utility prices don't fall easily."

If consumer prices do start to drop, they will fall slowly, he said, adding that inflation is likely to remain at or near current levels through the first half of 2023.

"Along with financial market volatility, the current complex crisis will go on for quite some time," he continued.

He is not worried about the falling foreign reserves and said the government will focus on monitoring the situation.

Foreign reserves fell to $416.8 billion in September from $436.4 billion at the end of August. It was the biggest monthly drop since 2008.

The Bank of Korea and the Finance Ministry net sold $15.49 billion of foreign currencies in the second quarter to stabilize the falling won, central bank data showed last Friday.

"While it is the biggest drop since the financial crisis, by ratio it's a small portion that can't be compared," Choo said, adding that Korea's foreign reserves had increased sharply since.

"It was often noted that authorities will take necessary actions in regards to stabilizing the market whenever there is volatility or the market psychologically moves one-sided due to internal or external factors, which the market also expected," Choo said. "The foreign reserves shrunk in the process of taking action."

The finance minister said he will push for a proposed corporate tax cut.

"I have no plan B," Choo said. "I only have plan A."

He noted that the Democratic Party, which is in the majority in the National Assembly, may not agree with the tax cuts, but that he will continue to engage lawmakers.

He said the role of the government is not to lead in everything, including creating jobs and raising competitiveness, but to establish an environment so those goals can be met.

Choo said he while agrees on government spending in times of crisis now was the time to cut taxes to support households and corporations.

"Instead of the government collecting more taxes from companies, it would be better if the companies directly utilize the additional capital," he said.

In July, the Yoon Suk-yeol government introduced a tax reform proposal. It included lowering the maximum tax imposed on businesses from 25 percent to 22 percent.

On Wednesday, the finance minister told lawmakers that the tax reform will benefit the entire country and not only the rich. He said that small companies will benefit more than large companies.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]