Koo Yoon-chul Vows to "Achieve 2.0% Growth Rate No Matter What"... Oil Price Cap to Continue if High Prices Persist

"Three Months of Critical Prolongation, We're Almost There"

If the Middle East Situation Drags On, the Government Will Continue Policy Mix Including the Price Cap


Semiconductors, Stock Market, and Tax Revenue Are Strong... IB Forecasts Exceed 2.0%

Government's Stated 2.0% Growth Rate "Will Be Achieved No Matter What"

Koo Yoon-chul, Deputy Prime Minister and Minister of Economy and Finance, emphasized that he will "do whatever it takes to achieve the originally stated 2.0% growth rate," despite uncertainties surrounding the Middle East war, which is approaching a "critical prolonged phase." He also hinted that the government would continue policies such as the oil price cap if high oil prices persist due to a prolonged shock from the Middle East.

First Vice Minister of Economy and Minister of Finance Koo Yoon-chul holds a press conference on the 5th (local time) in Samarkand, Uzbekistan, where the Asian Development Bank (ADB) annual meeting is being held, responding to reporters' questions. Ministry of Economy and Finance

Middle East War to Enter Critical Prolonged Phase by the End of This Month

On May 5 (local time), during a press conference held in Samarkand, Uzbekistan, where the Asian Development Bank (ADB) annual meeting took place, Deputy Prime Minister Koo addressed questions about the timing of the Middle East war entering a critical prolonged phase. He said, "I think it will be three months, and we are now approaching that three-month mark." Nevertheless, he explained that the semiconductor industry, the stock market, and tax revenue are all performing well, and that investment bank (IB) forecasts are significantly higher than the government's original target of 2.0%. Koo stated, "(The revised government target) will be addressed in detail when we announce the economic policy direction for the second half of the year," adding, "We will do our best to support the recovery of the Korean economy."

What the government is most wary of in this process is inflation driven by rising oil prices. Even though the government introduced an oil price cap to allow consumers to buy gasoline and diesel at prices lower than international oil prices, concerns over inflation remain. If the Bank of Korea responds to inflationary pressures by raising its base rate in earnest, it could negatively impact domestic demand, including consumption, and place particular strain on vulnerable groups. Currently, Yoo Sang-dae, Deputy Governor of the Bank of Korea, who is attending the ADB annual meeting in Samarkand, officially stated, "It is time to consider a shift toward rate hikes," increasing the likelihood of a change in monetary policy direction.

Deputy Prime Minister Koo said, "Since vulnerable groups are facing challenges, we provided support through the first supplementary budget, and thanks to favorable tax revenue, we implemented a supplementary budget that repaid 1 trillion won in government bonds without issuing new ones. Even in the United States, when I visited Washington last month, oil prices had risen by 50%, which was a significant burden. In Korea, however, both gasoline and diesel prices have been stably set through the price cap policy, and we are doing well so far," stressing, "We will monitor price developments closely and respond as needed."

Koo Yoon-chul, Deputy Prime Minister and Minister of Strategy and Finance, held a press conference on the 5th (local time) in Samarkand, Uzbekistan, where the Asian Development Bank (ADB) Annual Meeting was held, answering questions from the press. Ministry of Strategy and Finance

If High Oil Prices Continue, the Price Cap Policy May Remain

With the possibility of a rate hike by the Bank of Korea increasing, the burden of economic stimulus policies has also grown. When asked about policy coordination with the Bank of Korea, he replied, "Since the Deputy Governor mentioned it, he must have reflected the sentiment within the Monetary Policy Board regarding the possibility of a rate hike. I believe the Board will take into account both the economic and market conditions when making its decision on interest rates." He added, "The stock market is sensitive, but it has actually improved compared to before the war. I believe the market assesses our policy responses positively. Moving forward, we will continue to coordinate policies with the Bank of Korea as appropriate. We will also work closely with the Bank of Korea, the Financial Services Commission, and the Ministry of Economy and Finance to reduce market volatility."

Regarding whether the oil price cap, which helps curb inflation but places a heavy fiscal burden, will be maintained, he said, "It depends on when the Middle East war ends." The government compensates refiners for the gap between international oil prices and the capped prices. To this end, 4.2 trillion won has been included in the supplementary budget, but market observers predict that if the policy continues as is, funds will soon be depleted. Deputy Prime Minister Koo said, "Since oil prices are exceeding $100, if the situation in the Middle East is prolonged, the government will need to respond by combining various policies, including the price cap policy."

On the won-dollar exchange rate, which is currently in the 1,470 to 1,480 won range, he said, "Since exchange rates are determined by the market, it is not appropriate for me to comment on a specific level," and added, "Whether it is the exchange rate, inflation, or growth, the key point is how quickly the Middle East war stabilizes." He continued, "If there is volatility in the foreign exchange market, the government will respond proactively through a combination of policies."

Meanwhile, regarding a possible second supplementary budget, Deputy Prime Minister Koo stated, "For now, we need to focus on executing the first supplementary budget," and made no further comments. On the progress of a Korea-U.S. currency swap, he replied, "There have been changes, such as a change in the Chair of the U.S. Federal Reserve, so we need to consider these developments comprehensively," thus avoiding a direct answer.

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