By Kim Yoo-chul
Battered by worsening economic indices such as weaker-than-expected growth, a feeble job market and decreasing investment, Cheong Wa Dae is formulating plans to deal with these including changing President Moon Jae-in's economic team.
Concerns of a possible economic downturn dragged down the country's stock markets recently to a 17-month low as a key index in Seoul continued to slide. Experts say the decline started after the International Monetary Fund (IMF) lowered the country's growth forecast.
“Without adjustments or changing course, current economic policies will lead to further losses,” said an economist at the Bank of Korea (BOK). He added the bank is keeping its benchmark rate unchanged due to rising household debt, growing financial imbalances and fewer-than-expected job additions, despite the widening gap with the United States.
The government announced a new set of plans recently to boost economic growth and job creation by providing financial support for companies, and cutting the fuel tax to lift consumption. Given this, the President may change his economic team led by chief policy maker Jang Ha-sung and Finance Minister Kim Dong-yeon, a senior official told The Korea Times, Sunday.
“The presidential office is doing unofficial and official background checks on contenders for a new economic team. Korea Development Bank Chairman Lee Dong-gull and Eximbank CEO Eun Sung-soo are possible replacements for the finance minister. Office for Government Policy Coordination head Hong Nam-ki is considered a serious alternative to Jang as presidential chief of staff for policy,” the official said asking not to be identified.
Regarding the issue, Jang said, “This is a matter I can't control.” Separately, Finance Minister Kim said he was still in a position to control and oversee economic policies, but added he would take “full responsibility” if necessary.
“I came here to discuss follow-up measures about the government's fiscal budget plan next year which President Moon Jae-in directly asked the National Assembly to pass,” Hong told reporters after a meeting at Cheong Wa Dae.
Presidential spokesman Kim Eui-kyeom said the issue of creating a new economic team was up to the President adding he had no comment on the issue.
Last year, President Moon appointed then Korea University professor Jang to the position as he had a solid track record of research on inequality and corporate governance. Jang is also known as the designer of the administration's signature “income-led” growth policy, aimed at spurring private consumption by increasing the minimum wage.
Finance Minister Kim, a former Ajou University president, is an economics expert who is highly credited in politics, industry and even academic circles.
While the President was hoping for his economic team to address pending issues effectively through a mixture of flexibility and market demand, “different thinking” in applying policies to revitalize the stalled economy has led to controversy.
Kim preferred to adjust the “income-led” growth policy, asking Jang to initiate plans to boost private consumption and encourage business investment to increase hiring. But Jang appeared to have focused on the other side of economic policy, wealth distribution, according to government officials and economists.
Months ago, a war of words broke out between Kim and Jang over the flipside of income-led growth after Jang said momentum would have maintained income distribution. The finance minister said the move would lead to job cuts and the effects of the policy would be “short-lived” because more employers would illegally underpay their workers.