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| Finance Minister Hong Nam-ki, right, shakes hands with Bank of Korea Governor Lee Ju-yeol ahead of their meeting in Seoul, Wednesday. Courtesy of Ministry of Economy and Finance |
Gov't seeks policy mix with central bank for revival
By Park Hyong-ki
The economy is unlikely to be sustained by exports of semiconductors in 2019 as the industry is facing a down-cycle, Bank of Korea Governor Lee Ju-yeol said Wednesday.
He expressed this concern, while questioning how long the economy can manage to grow only by relying on chips.
"It is worrisome when we look five years ahead," Lee said at a press meeting Tuesday.
"I am also worried about how much the downturn will spill over to other industries that are already experiencing difficulties, and affect the economy."
This comes as exports of chips have accounted for 20 percent of the country's total outbound shipments.
Also, the industry is winding down its investment given it has completed most of its plan to purchase equipment for plant expansion. And this is further weighing on an index measuring corporate investment, according to Statistics Korea.
Analysts say it would be "wishful thinking" to say chips will continue to sustain the economy.
"We hope this will last. But the reality is it won't, and it will slow overall private investment in 2019," said Song Min-kee, an economist at the Korea Institute of Finance (KIF), in a press event hosted by the Financial Services Commission.
As the economy faces growing uncertainties and hardship, Finance Minister Hong Nam-ki stressed the importance of combining its fiscal policy with the central bank's monetary policy.
Hong paid a courtesy call to BOK Governor Lee, asking for interagency cooperation through the policy mix in an effort to revive investment and consumption, and create jobs in 2019.
"I deeply understand that the central bank is an important partner," Hong said in a meeting with Lee at the central bank in Seoul, Dec. 19.
"As you know, the economy is facing both internal and external uncertainties. But there is a limit to revitalizing the economy only with an expansionary fiscal policy."
Lee said the central bank will further collaborate with the finance ministry to tackle problems such as falling birthrate, aging population and inequality.
He added the BOK will back the government's measures, unveiled Dec. 17, aimed at encouraging investment by the private sector via various "mega projects and deals" involving infrastructure development.
But some industries that already posses power need to let go some of their power for new industries to emerge and thrive as the country seeks to relax regulations enabling the growth of open platform businesses.
"The public, the government and the private sector will have to work together to let new industries emerge and grow," Lee said, referring to the latest conflict between taxis and Kakao's carpool application.
Hong mentioned in a press conference Dec. 17 that it was tough to break social misconceptions toward new business models for sharing economy. It will need further discussion on the matter before moving to relax related regulations, he added.
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