[New Year's Address] Lee Ju-yeol "Many Obstacles Ahead... Strengthening Selective Support in Preparation for K-Shaped Recovery"

2021 New Year's Address by Lee Ju-yeol, Governor of the Bank of Korea

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[Asia Economy Reporter Eunbyeol Kim] Lee Ju-yeol, Governor of the Bank of Korea, stated on the 31st, "The economy is expected to recover moderately in 2021, but there are many hurdles to overcome before entering a full recovery phase," and added, "Monetary policy needs to maintain an accommodative stance until the economy is expected to continue a stable recovery."

In his '2021 New Year's Address' on the same day, Governor Lee said, "Although some countries have recently started vaccinations, the resurgence of COVID-19 is not easily controlled, and variants are emerging, making it difficult to predict the end of the pandemic. There is also a possibility that economic nationalism may resurface at any time, intensifying trade conflicts."

He meant that due to high uncertainty and inflation rates expected to remain below target levels for a considerable period, it is necessary to maintain an accommodative stance.

However, he also mentioned the need to be cautious about the structural vulnerabilities of the domestic economy and the risk of accumulating financial imbalances. Governor Lee said, "Low birth rates and aging are restricting economic vitality, while the differential impact of COVID-19 is deepening imbalances between sectors and social classes," adding, "If the economic recovery unfolds in a K-shaped pattern, small business owners and low-income groups may continue to be excluded from the recovery." He expressed concern that the increase in marginal firms and the expansion of leverage among households and companies could weaken the resilience of economic agents to external shocks.

Therefore, Governor Lee emphasized that given the high economic uncertainty, policy support should not be spared, but selective support should be strengthened to advance the recovery of vulnerable sectors even slightly. Regarding the unprecedented accommodative measures taken so far, he advised, "We must carefully examine the future development of COVID-19, economic trends, support effects, and side effects, and prepare in advance how and when to normalize policies."

He also noted the need to pay attention to financial stability, as concerns have increased about the risk of financial imbalances accumulating due to liquidity released during the COVID-19 response flowing into asset markets and the increase in private credit.

Regarding demands to legally specify employment stability as a responsibility of the Bank of Korea, he said, "Employment stability supports sustainable growth and improves the quality of life of the people, so the central bank should appropriately consider employment conditions as an important factor in monetary policy decisions." However, he added, "Since it may be difficult to maintain policy consistency when operating monetary policy with multiple potentially conflicting goals, we should refer to domestic and international research results and cases, actively listen to experts' opinions, and derive the optimal plan suitable for our conditions."

Governor Lee also expressed the opinion that in preparation for the post-COVID era, the structural transition to an eco-friendly and digital economy should be taken as an opportunity to expand future growth engines, while striving to maximize the creativity and entrepreneurship of the private sector.

Meanwhile, the Bank of Korea recently completed a process of gathering employees' opinions and diagnosing organizational health through external consulting. Governor Lee said, "To continuously produce organizational performance that can contribute to the national economy, a healthy organizational culture must be the foundation," and added, "We must achieve innovation in all management and personnel areas, including recruitment, placement, evaluation, and compensation, while eliminating inefficient work practices."

He further emphasized, "We intend to accept the diagnosis results without reservation and use them as a starting point for organizational improvement efforts," and said, "While prioritizing short-term feasible improvement measures, we will also work together to develop mid- to long-term management and personnel innovation plans."

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