"South Korea Ranks 1st Among 21 Countries in Economic Policy Uncertainty Growth Rate"

Last Year Index 257.4, 77.2% Increase Compared to Previous Year

[Asia Economy Reporter Dongwoo Lee] A survey revealed that South Korea had the highest growth rate in the Economic Policy Uncertainty Index among 21 countries last year.

The Korea Economic Research Institute (KERI) announced on the 3rd through its report titled "The Impact of Economic Policy Uncertainty on Corporate Investment" that South Korea's Economic Policy Uncertainty Index was 257.4, ranking 6th highest among the 21 countries surveyed. During the same period, the growth rate of the uncertainty index increased by 77.2% (+112.2) compared to 2018 (145.2), ranking first.

Countries with high growth rates in the Economic Policy Uncertainty Index following South Korea were Chile (60.4%), Australia (59.2%), China (52.3%), Singapore (41.5%), and Russia (37.4%).

KERI stated, "South Korea's Economic Policy Uncertainty Index in 2019 was the highest in the past 10 years and more than tripled compared to five years ago (2014)."

Furthermore, the report emphasized that higher economic policy uncertainty leads to a decrease in corporate investment. KERI analyzed domestic companies listed on the KOSPI and KOSDAQ from 2001 to 2019 and found a significant negative correlation between the Economic Policy Uncertainty Index and corporate investment.

As economic policy uncertainty increases, corporate investment in facilities and research and development decreases. The report added that the negative relationship is more pronounced in facility investment, which is larger in scale and has a more irreversible nature than research and development.

KERI elaborated that this result suggests that the mere increase in uncertainty can cause side effects such as contraction or delay in corporate investment activities.

The report advised that policymakers need to understand that not only the internal financial soundness of companies but also the stability and predictability of domestic and international economic policies affect corporate investment.

Meanwhile, the report used the "Economic Policy Uncertainty Index" developed by the research team of Professors Scott Baker, Nick Bloom, and Steven Davis from the United States as an indicator of economic policy uncertainty. The uncertainty index is measured by counting the number of newspaper articles containing terms related to domestic and international economic policy uncertainty by country.

Kim Yoon-kyung, a research fellow at KERI, said, "Minimizing policy uncertainty is essential to activate private investment and maximize resource efficiency across the economy," adding, "Policies to expand investment incentives should be established to quickly overcome the impact of the novel coronavirus disease (COVID-19)."

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