BOK chief calls on gov't to encourage corporate investment

Bank of Korea Governor Lee Ju-yeol, third from left, speaks during the conference with CEOs of the nation's commercial banks at the central bank's head office in Seoul, Friday. / Yonhap

By Jhoo Dong-chan

Bank of Korea (BOK) Governor Lee Ju-yeol urged President Moon Jae-in and his policymakers, during a meeting on Friday with CEOs of the nation's commercial banks, to do a better job in encouraging companies to invest here.

Lee's remarks follow the central bank's recent study suggesting Korea's GDP growth unexpectedly contracted 0.3 percent in the first quarter of the year due to falling private investments and exports.

The last time the quarterly growth declined was in the fourth quarter of 2017 when it shrank 0.2 percent. But the 0.3 percent contraction in the first quarter marks the biggest drop since the fourth quarter of 2008 when the economy declined 3.3 percent amid the global financial crisis.

“Concerns are mounting about the economy as the country unexpectedly contracted a negative growth in the first quarter,” Lee said during the financial conference at the central bank's head office in Seoul, Friday.

“One of the major reasons behind the nation's sluggish economy was a decline in corporate investment. The current economic situation at home and abroad isn't very favorable. In a bid to overcome these difficulties, the government needs to come up with a policy to encourage corporate investment.”

Lee, however, claimed the nation's poor growth in the first quarter is a one-time thing.

“There were some unprecedented factors in the period. I don't think the downtrend will continue throughout the year,” he said.

“The government spending for contributions to economic growth will increase, and global economic conditions will improve gradually.”

The conference has been held twice a year, where the BOK chief and CEOs of the nation's commercial banks meet to discuss current economic and financial issues. The previous conference was held on Nov. 2.

IBK Securities Economist Ahn So-eun claimed the economy will continue to fluctuate depending on external factors.

“Korea's Q2 growth may recover a bit. However, the nation's economy is likely to continue its heavy dependence on external factors unless the government comes up with additional measures,” she said.

“The government is attempting to deploy 6.7 trillion won ($5.77 billion) worth of extra budget, but that amount mostly highlights employment, welfare and environment. It won't help much.”

Finance Minister Hong Nam-ki held an emergency meeting in Seoul immediately after the BOK report was released Thursday, calling for the National Assembly to support the government's supplementary budget, which was submitted Thursday for approval.

He said the shocking and unexpected contraction was due to falling exports on weakening semiconductors amid a global slowdown, noting exports have dropped for four consecutive months.