[The Editors' Verdict] Yoon Suk-yeol Administration's Economic Team Report Card: B+

It is the last day of June. The Ministry of Economy and Finance usually announces the 'Second Half Economic Policy Direction' in the last week of June. This announcement signals to the private sector the government's intended direction for economic policy in the second half of the year. This year, the announcement has been delayed and is scheduled for next week.

Based on the '2023 Economic Policy Direction' announced at the end of last year, I wanted to evaluate the economic team of the Yoon Suk-yeol administration and give them a report card. When referring to the government economic team, it usually means the Ministry of Economy and Finance, the Bank of Korea, and the Financial Services Commission (including the Financial Supervisory Service). Although there are other economic ministries such as the Ministry of Trade, Industry and Energy and the Fair Trade Commission, the three fiscal, monetary, and financial authorities that hold key economic policy tools?budget, taxation, finance, and benchmark interest rates?can be considered the government economic team. Specifically, this evaluation could include four people: Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, Bank of Korea Governor Lee Chang-yong, Financial Services Commission Chairman Kim Ju-hyun, and Financial Supervisory Service Director Lee Bok-hyun.

Sometimes the president or the economic team is evaluated based on growth rate, stock index, or per capita national income, but this is not advisable. These figures are outcomes influenced by domestic and international economic conditions and do not indicate how well or poorly the economic team performed. In this sense, former President Lee Myung-bak’s 747 pledge (7% annual growth rate, $40,000 per capita income, 7th largest economy in the world) or former Democratic Party presidential candidate Lee Jae-myung’s 555 pledge (5th in comprehensive national power, $50,000 per capita income, KOSPI 5000 era) missed the mark.

Evaluation of the economic team should be based on how well they responded to domestic and international economic situations, how they minimized side effects and overcame crises if any, and how properly they carried out structural reforms and fostered future growth engines to enhance the long-term growth potential of our economy. This inevitably involves a certain degree of qualitative assessment.

The Ministry of Economy and Finance set freedom, innovation, fairness, and solidarity as the four pillars of economic management in the '2023 Economic Policy Direction,' aiming for crisis recovery and economic re-acceleration. The four basic directions were defined as macroeconomic stability management, support for recovery of the livelihood economy, revitalization centered on the private sector, and improvement of future-prepared economic structure.

Until early this year, the economy was in a crisis due to bond market instability caused by the Legoland incident, concerns over real estate project financing (PF) defaults, a sharp rise in the won-dollar exchange rate, soaring prices, rapid benchmark interest rate hikes, sluggish exports, and trade deficits. The media called it a 'complex crisis' and warned by comparing it to the 2008 global financial crisis. Although the actual situation was not that severe, it was still a crisis.

Now, the exchange rate and prices have stabilized to some extent, and concerns over bond market instability and large-scale real estate PF defaults have significantly eased. The Bank of Korea froze its benchmark interest rate earlier than the U.S. Federal Reserve as inflation slowed. The continued trend of easing inflation has proven the Bank of Korea’s decision to be correct. Communication and cooperation among macroeconomic policy authorities such as the Ministry of Economy and Finance, the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service have been smoother than ever. Although there were criticisms that the Financial Supervisory Service’s efforts to curb excessively high bank loan interest rates interfered with market price functions, and some pointed out that Director Lee Bok-hyun was overstepping, the results seem to have been positive. “Macroeconomic stability management” deserves a “Well done.”

Support for the livelihood economy, including price stabilization, easing living cost burdens, and strengthening support for small business owners, as well as revitalization centered on the private sector through export promotion, investment stimulation, regulatory innovation, and the New Growth 4.0 strategy, were somewhat ambiguous in terms of tangible impact, so “Somewhat done.”

Future-prepared structural improvement, including the three major reforms in labor, pensions, and education, and the three major innovations in finance, services, and the public sector, showed achievements such as maintaining sound fiscal principles in public innovation, but structural reforms made little progress and financial and service innovations were sluggish, so “Poorly done.”

However, considering the difficulty of structural reforms and innovations, overall, “Well done.” The overall grade is B+.

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