Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Biden will be better for Korean economy
By Lee Min-hyung
By Lee Min-hyung
With U.S. Democratic presidential candidate Joe Biden inching closer to electoral victory, Korea is putting more of its economic hopes on his possible presidency, recognizing it as a major stimulus for growth in trade and exports here.
For the past four years since the incumbent President Donald Trump took office, the economy has been considered by many as being in a state of dormancy, with its GDP growth seeing a gradual decline to 2 percent in 2019 from 3.2 percent in 2017.
Some argue Trump's “America-first” trade policy applied to its Asian partners has particularly created unfavorable conditions for the export-driven economy here. The economy has also been sandwiched by trade friction between Washington and Beijing, which many economists said has burdened Korea's trading activities with Asia's largest economy.
Many economic indices also signal that Biden's possible election win will help the economy bounce back faster and more stably over the next few years. Recent reports by the Hyundai Research Institute showed a Biden presidency will boost Korea's GDP growth by as much as 0.4 percentage points than a scenario with Trump's reelection.
The financial authorities are keeping a close watch on election updates, but their general view is that the nation's economy will remain on track for an earlier recovery in the near-term, regardless of the election results.
“Both candidates are supporting swift passage of additional pump-priming measures and are likely to continue monetary easing for the U.S. economy to tackle issues related to the COVID-19 pandemic,” a high-ranking government official said, Thursday. The economy will not suffer from any volatility after the election and remain on track for a stable recovery.
The official said Korea's leading exporters have reported solid earnings in the third quarter. “This sends an optimistic sign for economic growth in the fourth quarter,” he said.
“Despite the prolonged COVID-19 shock, Korea's production and exports in the manufacturing industry showed their resilience.”
The Bank of Korea (BOK) did not issue specific announcements for policy guidelines after the U.S. election, but is likely to maintain its easing stance for the foreseeable future in line with the U.S. Fed's position of keeping near-zero interest rates until 2022.
“The central bank will continue to analyze how the U.S. election results will affect Korea economically from various angles,” an official from the BOK said. He declined to give more details over a possible Biden election win, citing potential volatility in the local financial market.
Local economists expressed hopes for Korea to achieve better GDP growth if Biden clinches the presidency.
Kim Dae-jong, a professor of business administration at Sejong University, said the top priority for an economic rebound here is to increase export volume. “Korea has a high level of trade dependency with its trade-to-GDP ratio reaching around 65 percent, and this is the world's second-largest following Germany,” the economist said.
As Biden is a strong advocate of multilateralism and plans to enhance global trade, the economy will benefit a lot from his overseas policies, rather than Trump's protectionism, according to him.
“Biden wants the U.S. to rejoin global trade deals,” he said. Biden pledged to become a “normal president” in terms of global trade, so this is a positive signal for Korea to reactivate its trade and export activities.
“Korea's trade-to-GDP ratio reached as high as 80 percent in the past, but this is no longer the case,” he said. “Increasing the trade volume is one of the most crucial factors for a faster economic recovery here, and no one can refute that Biden will be better than Trump in this context.”