ed Shakeup for worse?
New finance minister has a lot to prove
Can Rep. Yoo Il-ho fill the shoes of the outgoing Finance and Deputy Prime Minister Choi Kyung-hwan? Not that Choi, now preparing for the April general election, has left any meaningful legacy to speak of in fixing the economy.
First, the way Yoo was brought back into the Cabinet reduces his credibility, raises questions about whether he can even pick up where Choi left off and complete President Park Geun-hye’s reform agenda.
Only last month, Yoo quit his job as minister of land, infrastructure and transport, to run in the parliamentary elections. Even then he had only been in the post for eight months. By many indications, he came back in a deal he cut with President Park Geun-hye, in which he gave up his bid for another four-year term at the National Assembly in exchange for the post of being the highest official in the economic policy-making process during the remaining two years of the Park presidency.
His nomination, thereby, is depriving him of the gravitas the job requires. Combined with the rest of the new lineup in five other ministerial posts, Park’s Monday shakeup leaves the impression that her priority lies in helping in the victories of Saenuri candidates, pushing the governance of the nation aside.
None of Park’s four reform agendas have been fully legislated. The labor reform bills are hanging in the balance at the ongoing special session of the Assembly; while those on the public, education and financial sectors have yet to get started in earnest.
When the elections are over, Park’s political capital is expected to ebb with less than two years left in office. By that time, newly-elected lawmakers would feel less loyalty toward her.
Under this set of adverse circumstances, it is an open question whether Yoo will be capable of pushing ahead with the reform agenda, especially under a president who is often criticized for her reluctance to get her hands dirty.
In his post-nomination press meeting, Yoo refrained from saying things that could upset the markets. “Don’t expect any drastic deviation from my predecessor.”
The concern, however, is that he may be too conservative for his job. The outgoing Choi launched an expensive pump priming effort to the tune of 40 trillion won, but growth for this year is expected to sink far below forecasts. Despite the recent credit rating upgrade by Moody’s, Korea Inc. is showing symptoms of the “new normal” hitting advanced countries, characterized by low growth, low inflation and low employment.
Some compare the current challenge to that facing the nation in the 1997 currency and the 2008 subprime mortgage crises.
“I don’t expect any dramatic change from the U.S. Federal Reserve’s rate hike,” he said about its 0.25 percentage-point raise, the first in nine years. “Responses will be gradual.”
Does this mean that Yoo wants the Bank of Korea (BOK) to refrain from any immediate rate hike? If he does, it could be taken as a premature show of intention on an important monetary policy as well as an uncalled-for intervention in the BOK’s rate-setting authority. If he doesn’t, he risks triggering misunderstanding in the market.
In other words, Yoo is now in a whole new ball game. His priority is to prove he is more than a tax specialist and is up to his new job as chief of the nation’s economic team; or the nation could be in