[New Year Economic Outlook by Ruling and Opposition Economic Experts] ④ Hong Seong-guk "This Year's Growth Rate Difficult Even at 1.5%... Structural Transformation Must Be Achieved"

Trump's Second Term, Impeachment Trial of Yoon Seok-yeol Cited as Variables
"Political Leaders Must Bear Historical Responsibility"

Hong Seong-guk, chairman of the Democratic Party's National Economic Advisory Council, forecasted in a phone interview with Asia Economy on the 2nd that this year's real Gross Domestic Product (GDP) growth rate would struggle to reach 1.5%. He pointed out that political leaders need to present a new vision for a major transformation to revive the structurally sluggish Korean economy.

Interview_Hong Seong-guk, Member of the Democratic Party of Korea. Photo by Kim Hyun-min kimhyun81@

Chairman Hong predicted that the economy would continue its downward trend that began in the second quarter of last year. According to the Bank of Korea, the year-on-year real GDP growth rates recorded in the second and third quarters of last year were only -0.2% and 0.1%, respectively. He said, "Domestic institutions expect growth rates in the 2% range, but even 1.5% this year will be difficult," adding, "The Korean economy has fallen into structural stagnation. It will not be easy to resolve."

He cited semiconductor and domestic demand slumps as reasons for the structural stagnation. Chairman Hong said, "Excluding semiconductors, Korea's exports are no different from those 10 years ago," and added, "Self-employed people are effectively at their limit due to interest burdens and lack of consumption." He continued, "Since income and employment are poor, people do not consume," emphasizing, "Companies are also in a situation where they cannot boldly make long-term investments."

As an economic variable for next year, he pointed to U.S. President Donald Trump. He explained that the world would be affected by the 'Trump phobia,' a fear of President Trump who emphasizes America-centric policies. Chairman Hong said, "Trump phobia will further reduce consumer and investment sentiment," and "It will inevitably have a negative impact on the Korean economy."

Domestic political instability, such as the impeachment trial of President Yoon Seok-yeol, is also one of the variables. On the 27th of last month, the won-dollar exchange rate temporarily rose to 1,486.7 won amid political instability. This was the highest level recorded in 15 years and 9 months since March 2009, when the U.S.-originated financial crisis occurred. Chairman Hong said, "Even if President Yoon is impeached, political instability will continue until the early presidential election in the first half of next year," adding, "Due to internal strife and impeachment, companies will postpone investment decisions."

However, Chairman Hong explained that there are not only negative aspects regarding diplomacy. Recently, domestic companies have established factories in the U.S., creating a foundation to confidently make demands to the U.S. He said, "No other country has invested in the U.S. as much as domestic companies have," and "Since they have created many jobs in the U.S., they have something to say to Trump." He also added, "Looking at Trump's policies, there are contradictory aspects," and "Once his term begins, he will not make only unpredictable decisions."

Chairman Hong emphasized that a structural transformation must begin this year to revive the sluggish Korean economy. He also stressed that politics should lead this role. He said, "Although these are suggestions for the economy, it is time to overhaul Korea's overall structure, including education," and emphasized, "The current political leaders of Korea have been given a task. It is not the time to consider only political interests but to bear historical responsibility."