Hong Nam-ki: "We Will Maintain Our Superiority in Memory Semiconductors... Strong Commitment to the Non-Memory Sector as Well"

Asked about additional supplementary budget formation, "I have not thought about it at all"
"There is a need to be cautious about the rapid increase in (debt) growth rate" mentioned

[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kim Hyunjung] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, emphasized on the 28th, "The government is striving to maintain South Korea's 'super-leading' position in memory semiconductors and has a strong will to secure competitiveness in non-memory semiconductor fields such as system semiconductors."

At a press conference with foreign reporters on the same day, Deputy Prime Minister Hong explained the government's support plans related to semiconductors, saying, "The competition to build a country-centered semiconductor supply chain is intensifying, which could pose risks to Korea, but we will attempt to secure new competitiveness." He added, "Regarding SK Hynix's 120 trillion won semiconductor cluster development, the government will make every effort to support infrastructure such as power, water supply, and roads, which companies find challenging," and said, "For system semiconductors, we will accelerate growth even by increasing advanced research and development (R&D) tax support."

Regarding the recent shortage of automotive semiconductors, he said, "TSMC in Taiwan mainly produces a large volume of automotive semiconductors, but it is not that Korea lacks the capacity to produce them; rather, the business scale is not sufficient," and added, "I believe the disruption of the global value chain (GVC) causes significant losses."

He continued, "In the short term, we can greatly simplify customs clearance to secure stable supply from overseas or prepare support measures related to vaccination and self-quarantine in overseas procurement negotiations," and added, "In the mid to long term, the government can help by creating a roadmap for companies' investment in automotive semiconductors and technology development and by establishing inter-company linkage systems."

In response to foreign institutions' concerns that Korea's heavy focus on the semiconductor industry might cause a decline in competitiveness in other industries and economic difficulties, known as the 'Dutch disease,' he replied, "Nevertheless, semiconductors are an essential infrastructure industry in the 4th industrial era, so I think the importance of the industry is more highlighted than concerns about Dutch disease."

Regarding the first quarter real gross domestic product (GDP) growth of 1.6% quarter-on-quarter, which restored the economy to pre-COVID-19 levels but with employment conditions still difficult, he said, "I believe employment will gradually recover with a lag of about 3 to 5 months after the economic recovery." He added, "Although there is a base effect due to last year's poor COVID-19 situation, employment improvement effects following economic recovery will also follow," emphasizing, "A significant portion of the March increase in employment was seen in information technology (IT) fields where young people can participate." He explained, "However, looking at demographic changes, the population in their 20s and 30s is decreasing, so the number of employed people naturally declines. The population in their 30s decreased by 140,000 even in March," and said, "If employment in the 40s age group decreased by 170,000, about 70,000 to 80,000 of that is a structural decline that cannot be helped."

Regarding private consumption not yet recovering to pre-COVID-19 levels, he said, "The recovery speed seems to be accelerating in the first quarter," and added, "I hope consumption recovers to pre-COVID-19 levels even in the second quarter, but the number of confirmed cases and the level of quarantine are the most important variables." He also said, "We need to decide this week whether to adjust quarantine levels next week, and if social distancing is strengthened, private consumption that rose in the first quarter could be restricted again," but added, "If quarantine is controlled, consumption related to daily necessities such as non-durable goods is expected to increase." He further said, "We have prepared consumption stimulus measures that can draw out private consumption, such as incentives for gift certificates and non-durable goods consumption, and will implement them if necessary."

Regarding additional supplementary budget (supplementary budget) formation this year, he stated, "We will prioritize quarantine and put all efforts into providing support funds, and we have no plans for additional supplementary budgets." On fiscal soundness issues, he said, "Growth driven by fiscal policy was inevitable last year, and a high fiscal contribution to growth is a desirable aspect," adding, "Objectively, compared to advanced countries, fiscal capacity is significantly better." He also said, "However, I cannot ignore the criticism that the speed of increase in national debt is too fast, and international credit rating agencies are watching this," and added, "The rapid increase rate needs to be carefully monitored."

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