Choo Kyung-ho: "Complex Economic Crisis to Persist for a Significant Period Next Year"

Deputy Prime Minister Hosts 'Macroeconomic Experts Meeting'

[Asia Economy Sejong=Reporter Kwon Haeyoung] Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated on the 7th that "the complex economic crisis situation encompassing the financial and foreign exchange markets as well as the livelihood and real economy is likely to persist for a considerable period next year."

Deputy Prime Minister Choo made these remarks during a meeting held at the Government Seoul Office with major research institutions, academia, and macroeconomic and financial experts from global investment banks (IBs). This meeting was organized to discuss opinions on domestic and international macroeconomic conditions, financial and foreign exchange market situations, and to gather policy suggestions in preparation for the 2023 Economic Policy Direction.

Choo emphasized, "Beneath the current difficult economic situation lie fundamental problems of our economy, such as the decline in private sector vitality due to government- and fiscal-centered economic management, and the increase in national and household debt, making it difficult to find solutions. The entire government is focusing all efforts on establishing policy directions to overcome the immediate crisis, including macroeconomic stabilization and recovery of the livelihood economy, and to enable the re-leap of our economy."

The participants of the meeting generally agreed that the domestic and international economic conditions next year could be more challenging than ever.

The global economy is facing increased recession risks due to sharp interest rate hikes by major countries and uncertainties in the Chinese economy, with difficulties expected to continue through the first half of the year. Opinions were also raised that the recovery trend in the second half will be determined by the direction of monetary tightening in major countries and the timing of easing China's lockdown measures.

There was consensus that South Korea’s economic downturn is accelerating due to export declines caused by worsening external conditions and a slowdown in consumption recovery following interest rate hikes. The growth rate of the Korean economy next year is generally expected to slow to the 1% range, with some opinions suggesting it could fall further if external conditions worsen significantly.

Participants recommended that to respond to economic risks, it is necessary to stabilize the short-term money market, preemptively manage real estate project financing (PF) issues related to falling real estate prices, maintain the soundness of financial institutions, and prepare for vulnerable groups facing increased difficulties due to the economic slowdown.

A Ministry of Economy and Finance official stated, "Participants emphasized the importance of the government proactively managing risk factors and urged the pursuit of the optimal macro policy mix considering the overall economic situation. They also stressed the need for active responses through micro-level measures to address downside risks that may materialize during the economic slowdown phase."