'Structural reform essential to boost economic resilience'

Bank of Korea (BOK) Governor Lee Ju-yeol delivered a keynote speech at the BOK 2019 International Conference at the Plaza Seoul, June 3. Courtesy of BOK

By Lee Kyung-min

The nation's top banker has called for Korean firms to speed up structural reforms to improve their economic fundamentals and better cushion any external blows to reap the benefits from rising global links.

He also said the global community should join forces to fight rising protectionism that has been destabilizing the global economy.

“We should heighten the resilience of the domestic economy to external shocks,” Bank of Korea Governor Lee Ju-yeol said in his opening speech at the Bank of Korea 2019 International Conference at the Plaza Seoul, Autograph Collection.

“To this end, it is essential to pursue structural reforms steadily, thereby boosting our potential for growth and job creation and improving our economic fundamentals,” he added. “It is important to keep the domestic economy stable through the proper conduct of macroeconomic policies.”

The two-day conference was attended by noted economists including Bank for International Settlements (BIS) Monetary and Economic Department Head Claudio Borio, Prof. Carmen Reinhart of Harvard University and Professor Charles Engel of the University of Wisconsin.

Lee stressed that central banks should play an important role in the fast changing global environment.

“Central banks, in particular, should carefully examine ways to expand their policy toolkits, reflecting the changes in the policy environment brought by closer global links,” he said.

The importance of international cooperation is increasing as ever, in the aftermath of the global financial crises in the 2000s, he stressed.

“Global links have become a vital channel through which not only products but also ideas, knowledge, and innovation are exchanged and disseminated. To prevent the recent trade tensions from damaging this channel, the global community needs to resolve them as soon as possible,” he said.

The remarks come amid apparent signs of slowdown in the growth of such links, compounded further by the escalating trade feud between the U.S. and China.

“Since the Global Financial Crisis, global value chains have weakened a bit, and cross-border bank lending has also been on a downward trend in the post-crisis period. If global links remain weak or weaken further, international specialization and the dispersion of technology could shrink, which could result in a huge adjustment cost for the global economy,” he noted.

Therefore, both advanced and emerging economies should share their views on global economic conditions, and work to coordinate policy through the G20 and other international forums, he added.

“Pooling our collective wisdom, we must strive to promote global links in a fairer, safer and more inclusive manner,” he said.

Meanwhile, Lee also recognized the growing need to strengthen social safety nets for those left behind and improve labor market systems, while remaining cautious that this does not undermine growth and development.

“We need to facilitate the smoother relocation of workers in areas of comparative disadvantage to more competitive fields. We have to foster fair competition and creative innovation so that we can maintain a business environment that continues to nurture new winners,” he added.