[Weekly Outlook] First Half Economic Forecast Released... Changes in Financial Services Commission and Financial Supervisory Service Leadership

KDI Likely to Revise Economic Outlook... Growing Uncertainty
Financial Chiefs' Appointments: Financial Services Commission Chair and Financial Supervisory Service Chief Under Scrutiny

Citizens are walking along the streets of Myeongdong, Seoul. Photo by Mun Ho-nam munonam@

As the 'three highs' of high inflation, high exchange rates, and high interest rates continue, the economic outlook for the first half of this year is set to be announced. With the U.S. Federal Reserve's tightening accelerating and economic uncertainties due to the Ukraine crisis still significant, it is expected that the forecast will be revised. The first financial chiefs of the Yoon Seok-yeol administration, including the Financial Services Commission chairman and the Financial Supervisory Service chief, are also expected to be revealed.

According to the financial sector on the 15th, the Korea Development Institute (KDI), a government-funded research institute, will release the economic outlook for the first half of this year on the 18th. This will be the first forecast since the new government took office. KDI had projected last year’s second half economic growth rate at 3% and consumer price inflation at 1.7%. However, given the rapidly changing economic conditions this year due to the Ukraine crisis, China’s 'zero-COVID' lockdown policy, and U.S. tightening, revisions are inevitable.

Market analysts suggest that KDI may lower its economic growth forecast to the mid-2% range and raise the consumer price inflation forecast to at least the mid-to-high 3% range. KDI has also expressed negative views such as downside risks to the economy in recent reports related to the economic situation.

The Statistics Korea will release household trends for the first quarter on the 19th. This data provides insights into household income, expenditure, and distribution. In the fourth quarter of last year, total household income increased by more than 6% year-on-year due to rises in earned income and business income, marking the largest increase in 10 years. There are expectations that household finances will improve again in the first quarter of this year.

On the 20th, the Bank of Korea will release the producer price index for April. In March, the producer price index recorded 116.46, rising 1.3% from February, marking three consecutive months of increase. This was influenced by the global surge in raw material prices such as international oil prices. Since international oil prices weakened in April compared to March, the producer price index may see a reduced increase or even a decline.

Financial leadership appointments are also expected. Ko Seung-beom, chairman of the Financial Services Commission, and Jeong Eun-bo, chief of the Financial Supervisory Service, both appointed during the Moon Jae-in administration, have tendered their resignations. Currently, Kim Ju-hyun, chairman of the Credit Finance Association, and Kim So-young, professor of economics at Seoul National University, are considered candidates for the chairman and vice chairman of the Financial Services Commission, respectively. Chairman Kim is a classmate of Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho from the 25th administrative examination. He has served as director of the Financial Policy Bureau at the FSC, standing commissioner of the Securities and Futures Commission, and secretary-general. For the vice chairman position, Choi Jong-hak, professor of business administration at Seoul National University, and Shin Sung-hwan, professor of business administration at Hongik University, are also mentioned.

For the Financial Supervisory Service chief, former prosecutors such as Jeong Yeon-su, a lawyer at Kim & Chang, Park Soon-cheol, former head of the Southern District Prosecutors' Office, and Park Eun-seok, a lawyer at Law Firm Lin, are being considered. All are graduates of Seoul National University Law School, like President Yoon Seok-yeol. Other names in the running include Lee Seok-hwan, representative lawyer at Seojeong, Lee Byung-rae, external cooperation vice chairman of the Korean Institute of Certified Public Accountants, and Lee Chan-woo, senior deputy governor of the Financial Supervisory Service.