Yoon vows bold deregulation, labor reforms amid stagflation fears
President Yoon Suk-yeol speaks during a meeting on the new government's economic policy direction in Seongnam, Gyeonggi Province, Thursday. Yonhap
Gov't seeks to overcome low growth with 'freer, fairer economy'
By Nam Hyun-woo
President Yoon Suk-yeol on Thursday promised to lift regulations and reform the labor market to counter fears of stagflation and other challenges threatening the Korean economy.
Yoon made those pledges as the government announced the new administration's economic policy direction, which is aimed at overcoming stagnant growth by facilitating a freer and fairer economy.
During a meeting on the new government's economic policy direction in Seongnam, Gyeonggi Province, Yoon said Korea's economy faces a “grave” challenge. He stressed that the government will overhaul the country's economy to become more market-oriented to overcome current challenges.
“The current economic circumstances in and outside of the country are very grave,” Yoon said. “With fears over stagflation emerging, the economy and the market are faltering due to a combination of challenges. … In a time of crisis, we need to make changes to be more market-oriented and have the private sector lead the entire economy,” he added.
Yoon has been championing the idea of deregulation and giving greater discretion to the private sector to help the country overcome current challenges and prevent stagflation ― an economic condition characterized by sharp inflation coupled with stagnant growth.
Along with other nations, Korea has also witnessed a sharp rise in inflation, as surging energy and grain prices coincide with a sharp recovery in demand. As of May, consumer prices in Korea increased 5.4 percent year-on-year, and the government anticipates the inflation rate will stand at 4.7 percent at the end of this year.
While prices are rising, Korea's growth dynamics are losing momentum due to structural problems in the education system, labor market and government spending.
Prime Minister Han Duck-soo and finance minister Choo Kyung-ho both warned that Korea's potential growth rate may dip to the 0 percent level by 2030, down from 3.8 percent during 2000 to 2007.
The pessimistic prospects for economic growth are not the only challenge.
Negative external factors, such as global supply chain disruptions and belt-tightening fiscal policies in major economies weigh heavily on Asia's fourth-largest economy.
“Regulations and schemes undermining corporate competitiveness and discouraging entrepreneurship will be drastically improved,” Yoon said. “Unfair practices disrupting market order will be strictly controlled based on laws and principles.”
Yoon also noted that structural problems in Korean society should be addressed to reverse the current stagflation trend. He said the labor market is “hampering job opportunities for the young generation,” the education system is “failing to nurture talent” and the pension system is “burdening the future generation.”
“The new government will no longer turn a blind eye to structural problems in society,” Yoon said. “This is a due path for a government which thinks about the future, and I believe politicians will show bipartisan cooperation for this cause.”
Participants listen as President Yoon Suk-yeol speaks during a meeting on the new government's economic policy direction in Seongnam, Gyeonggi Province, Thursday. Yonhap
Later on Thursday, the government announced its economic policy direction aimed at “overcoming low growth and facilitating a virtuous cycle of growth and welfare.” For this goal, the government said it will pursue four values: freedom, fairness, innovation and coalition.
Of those values, coalition was aimed at Korea's stronger ties with the international community to strengthen economic security through active participation in global economic blocs such as the Indo-Pacific Economic Framework and Comprehensive and Progressive Agreement for Trans-Pacific Partnership.
While announcing the economic policy direction, the government forecast Korea's real gross domestic product will grow 2.6 percent this year, down from its earlier projection of 3.1 percent.