"Uncertainty in South Korean Economic Policy Hits Record High... Non-Market Policies Must Be Removed"

"Labor and Real Estate Policies Contradicting Market Logic Increase Uncertainty"
"Government Must Clearly Present Policy Goals"

[Asia Economy Reporter Kim Eunbyeol] It has been revealed that economic policy uncertainty in South Korea reached an all-time high last year. It is pointed out that government policies that contradict market logic, such as labor policies and real estate policies, increased uncertainty. Economists emphasized that the government should remove the non-market policies it has implemented and clearly present policy goals.

Professor Kim Soyoung of the Department of Economics at Seoul National University stated at the 'Path to Recovery of the Korean Economy in 2020' seminar held by the Near Foundation at the Bankers Hall in Jung-gu, Seoul on the 14th, "Economic policy uncertainty last year recorded the highest level ever," adding, "When economic policy uncertainty increases, investment decreases, stock prices fall, and economic growth rates also decline." She further added, "In Korea's case, the fact that many non-market economic policies have been implemented and that policies did not specify concrete goals increased uncertainty."

According to the Economic Policy Uncertainty website, a U.S.-based economic research site related to uncertainty, South Korea's Economic Policy Uncertainty (EPU) index averaged 257.31 until November last year. The EPU index rose to 538.18 in August last year, marking the highest monthly level ever, which influenced the average. When compared on an annual basis, last year's EPU index was higher than in 2016, the final stage of the impeachment political crisis.

Professor Kim pointed to labor market policies and real estate policies implemented over the past 2-3 years as factors that increased uncertainty. It became difficult to predict when and what types of non-market policies would emerge, making it harder to assess their impact on the economy. In particular, she criticized the unclear goals of government policies and advised that policies consistent with market economy logic should be introduced. Professor Kim said, "Looking at policies such as income-led growth and new nation-building, the goals are sometimes too broad," pointing out that it is difficult to understand what exactly was targeted.

On the 14th, the Near Foundation held the seminar "The Path to Recovery of the Korean Economy in 2020" at the Bankers Hall in Jung-gu, Seoul.

Shin Seonghwan, President of the Korean Finance Association (Professor at Hongik University), also expressed concerns about domestic financial policies. He said, "Even looking at major banks, they are making considerable profits without effective competition," adding, "Nevertheless, financial authorities are showing an impatient attitude by directly intervening in prices rather than enhancing market competition." He also added, "Currently, liquidity in the financial market is abundant, and additional liquidity support policies by the government, such as the Innovation Growth Fund, are unlikely to help improve real economy productivity." Regarding the Bank of Korea's base rate cut last year, he said, "It only had the effect of normalizing the interest rate structure," and added, "It is uncertain whether the expected effects of the base rate cut will materialize."

Meanwhile, regarding fiscal expansion, which the government is emphasizing following income-led growth, there were both critical views and views that it is an unavoidable choice. Hong Jongho, President of the Korean Fiscal Association (Professor at Seoul National University), said, "In academia, there are quite a few arguments that expansionary fiscal policy is necessary and inevitable, as well as criticisms." Considering factors such as the elderly poverty rate, which is among the lowest in the OECD, increasing fiscal spending is also necessary. However, he added that an objective evaluation is needed to determine whether fiscal effects are being maximized.

This content was produced with the assistance of AI translation services.