Skepticism lingers over Park's new economic czar

By Choi Sung-jin

Yoo Il-ho, the new economic deputy premier and finance minister, has taken the helm of the national economy at a far more difficult time than his predecessor.

Yet Yoo’s record - or lack it - and his performance at his confirmation hearing, boring and unimpressive, are causing deep doubts among experts and business leaders on his ability to drive Korea Inc. through increasingly rough economic waters, analysts say.

The economic environment at home and abroad can hardly be worse.

China’s stock markets have plunged 14.6 percent this year, reflecting concerns about the world’s second-largest economy, and international oil prices are down 10.5 percent from the end of 2015, to hit their lowest in 12 years.

At home, exports recorded negative growth for 12 consecutive months and domestic consumption is falling back on the expiry of excise tax cuts, while household debt is ready to explode any time as the United States continues to raise interest rates. Political developments - major elections and North Korea’s nuclear provocations - would be of little help, either, they say.

“A perfect storm is approaching but the government has few policy cards left to use,” said an expert. “It’s as if the new finance minister has been sent to the battlefront with little ammunition.”

Yoo’s predecessor, Choi Kyung-hwan, spent enormous amounts of taxpayer money on a series of short-lived stimulus deals, leaving far larger debts for the nation than when he took office 18 months ago, as well as various other adverse economic effects.

Scarcely have the abilities and leadership of the top economic policymaker been more important than now. Unfortunately, the business community seems to have more concerns than expectations about Yoo. Business sources say Yoo may likely spend his tenure clearing up the mess Choi left rather than setting up his own agenda to reinvigorate the economy.

At the confirmation hearing, Yoo surprised lawmakers, saying, “The economic situation is never easy but can hardly be called a crisis,” showing wide discrepancy with general sentiments. He also vowed to hit the government’s economic growth target of 3.1 percent without forming an extra budget but fell short of telling how.

A business watcher said: “Has anyone heard about Yoo’s economic philosophy or specific policies? He will be the caretaker deputy premier at best, never a type who takes the initiative in changing the economy.”

The government plans to front-load budget disbursement to use it as pump-priming water for recovery, but its effects will rapidly dwindle in the latter half of the year, experts said. As long as businesses and households do not - and cannot - spend and invest, there are clear limitations for the government to boost the economy with fiscal spending alone. “A bigger problem is, the current economic team has few policy tools to use, fiscal or monetary,” said Professor Kim Byung-hoo of Sogang University.

Most other analysts said the growth target of 3.1 percent can be met only with massive government stimulus, which, however, will not be possible under current circumstances.

Yoo, a lawmaker-turned-bureaucrat, got a rare praise when he called for the completion of economic and other reforms. Experts, however, expressed doubts whether he would turn his words into action, given his lack of charisma and leadership.