Recession could fix inflation problem: Fkcci forum

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Recession could fix inflation problem: Fkcci forum

Published: 16 Mar. 2023, 18:35

From left: Lee Jang-hyuk, business professor of Korea University; Yoon Sang-ha, head of the international macroeconomic team at the Korea Institute for International Economic Policy; Adeline-Lise Khov economic counselor at the French Embassy in Korea; Oh Suk-tae, chief Korea economist at Societe Generale during the panel discussion at the Economic Forecast 2023 forum hosted by French-Korean Chamber of Commerce and Industry (Fkcci) on Thursday in central Seoul [FKCCI]

Amid escalating uncertainties caused by the collapse of Silicon Valley Bank, the big question is whether the financial turmoil will result in a recession — which may “cure the problem” of inflationary pressure, said a Korean economist.

The French-Korean Chamber of Commerce and Industry (Fkcci) held its annual business forum on the global and domestic economic outlook on Thursday at the Mondrian hotel, central Seoul.

“The fight between the central banks and inflation is not over yet,” said Oh Suk-tae, chief Korea economist at Societe Generale, during his presentation on the global economic outlook at the event.

Oh stressed that “the central bank in the United States should create a recession” to push down the inflation rate “back to the target of 2 percent.”

As the forecasts on the terminal rate are under adjustment following the recent collapse of Silicon Valley Bank and the resulting increase in macroeconomic uncertainties, Oh said how the situation would pan out needs to be monitored for the next few months.

Yoon Sang-ha, head of the international macroeconomic team at the Korea Institute for International Economic Policy, said that in 2023 the economic recovery will be “suppressed by tightening and fragmentation.”

Tightening refers to the hawkish fiscal policies of central banks, while fragmentation means structural shifts in the world economy caused by the intensifying U.S.-China rivalry and the war in Ukraine, explained Yoon.

For the Korean economy, the trade deficit, the reopening of China and falling real estate prices were cited as possible short-term challenges in 2023. Low labor productivity and low fertility rate were mentioned as some of the long-term risks.

"Despite anticipated low growth projection of 1.7 for this year, we want to remain an optimist for this year," said David-Pierre Jalicon, Fkcci chairman, during his opening remarks.

"And we still believe there will be opportunities for our members and French companies, as the fundamentals of the Korean economy remain stable."

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]