Outgoing finance minister urges incoming gov't to maintain fiscal soundness

Finance Minister Hong Nam-ki delivers a farewell speech at the Government Complex Sejong, Monday. Yonhap

By Lee Min-hyung

Outgoing Finance Minister Hong Nam-ki has urged the incoming administration to focus on maintaining fiscal soundness amid the rapidly aging population.

“The role of national finance has increased while we overcame the crisis of the COVID-19 pandemic, but this has inevitably resulted in the steep rise of the national debt,” Hong said in a farewell speech, Monday.

Hong was the longest-serving finance minister after having been appointed as the leader of the Ministry of Economy and Finance back in December 2018. With President Moon Jae-in ending his tenure on Monday, Hong also retired from his 37-year career as a bureaucrat.

Korea's national debt reached 660.2 trillion won as of the end of 2017, the first year since Moon took office. But the figure has since been on a steep increase to 965.3 trillion won in 2021.

“Global financial institutions and credit ratings agencies are giving increasingly sharp views on our financial sustainability,” he said. “Given the aging population, time is not on our side.”

He also called on the need to institutionalize fiscal rules into laws and regulations promptly, so that the incoming Yoon administration can ensure the government's fiscal role as well as soundness harmoniously.

“I hope the new government makes more efforts in managing the nation's mid-term fiscal plans by institutionalizing fiscal rules as soon as possible,” Hong said.

However, many local economists did not speak highly of Moon's signature economic policy represented by the income-led growth, which ended up sharply increasing the minimum wage in contrast to market-led logic.

“Few would say that the government-led growth initiative was successful,” a Seoul-based economist said. “The incoming administration should focus on normalizing any economic drives that went against basic market logic.”

Nonetheless, the incoming Yoon administration is widely expected to face a tougher time in doing so, at a time when it has to ensure economic growth while curbing inflation.

After the Korean economy bounced back to 4 percent growth in 2021 on the pandemic's base effect, it is feared that the economy will lose momentum for growth this year amid multiple uncertainties here and abroad. The general consensus is that Korea's GDP growth this year will fall below the 3-percent mark. The won-dollar exchange rate is also on a rapid rise and is feared to top the 1,300-mark in the future for the first time since the 2008 global financial crisis.