[New Year Interview] "From Fried Chicken Shops to Uber and Airbnb" ? The Answer to Raising Korea's Potential Growth Rate Is Clear

"Questioning the Path of the Economy and Finance in 2026" Relay Interview
① Shin Kwanho, President of the Korean Finance Association (Professor of Economics, Korea University)
Low-Productivity Service Sector Must Shift to High Value-Added Industries

"From Fried Chicken Shops to Uber and Airbnb."

On January 7, at the Jeonggyeong Hall of Korea University in Seongbuk-gu, Seoul, Shin Kwanho, President of the Korean Finance Association and Professor of Economics at Korea University, identified the "high value-added transformation of low-productivity service industries" as the key to rebounding South Korea's potential growth rate. He argued that the structure of the service sector, which is centered on low value-added industries such as food and accommodation businesses-exemplified by fried chicken shops-must be shifted toward high value-added service industries like Uber and Airbnb. He also predicted that the government's intensive support for the artificial intelligence (AI) industry would significantly boost productivity and contribute to raising the potential growth rate.

However, President Shin emphasized that the difficulty in rebounding the potential growth rate does not stem from not knowing the right answer, but from the arduous process required to reach it. Ultimately, this falls within the realm of politics; rather than siding with the various interest groups that block the way, it is now necessary to have "political will" to bridge the gaps between them and resolve side effects as the country moves forward.

Shin Kwanho, President of the Korean Finance Association, participated in a New Year interview with The Asia Business Daily on the 7th at the Jeonggyeong Hall of Korea University in Seongbuk-gu, Seoul, under the theme "Asking the Path of Economy and Finance in 2026."

Regarding the high exchange rate, which is one of the major concerns for the Korean economy at the beginning of the year, he assessed that both the current level and market expectations are excessive. He analyzed that concerns over the scale of investments in the United States have led to a herd mentality expecting a rise in the exchange rate, resulting in a temporary supply-demand imbalance. However, considering structural factors, he believes it will be difficult for the won-dollar exchange rate to fall below 1,400 won. He pointed out that raising the potential growth rate to prevent the growth gap with the United States from widening further is also necessary to ease concerns over the exchange rate.

The following is a Q&A.

-How do you evaluate South Korea's GDP growth rate this year?

▲The 1.8% forecast by the Bank of Korea is similar to the country's potential growth rate. It is still difficult to say that a full recovery has been achieved. I expect exports, especially semiconductors, to perform very well again this year. However, domestic demand, including construction, remains sluggish, and consumption only saw a brief improvement due to consumption coupons, with less progress than expected afterward. Interest rates are still high, and household debt is already elevated. After paying interest, there is not much room left for consumption. However, the revitalization of the stock market will help stimulate consumption.

-South Korea's potential growth rate is also declining. What is the biggest problem?

▲Potential growth rate is determined by capital, labor, and total factor productivity. Labor is unlikely to increase further due to aging. Capital accumulation is also expected to be less smooth than in the past. The remaining factor is productivity. The sector with the lowest productivity is services. This is because the service sector is largely focused on low value-added areas such as food and accommodation, represented by fried chicken shops. I believe these must be converted into high value-added service industries.

There are quite a few "zombie companies" that have not been swiftly restructured, and allocating resources to these companies is like "pouring water into a bottomless jar," which fails to increase overall productivity. Enabling limited resources to move to sectors with higher productivity and greater growth potential will help improve productivity and raise the potential growth rate.

I think the government's focus on nurturing AI and robotics is a very good move. However, for this to succeed, new corporate innovations must occur smoothly, and regulations often block innovation. Rational regulatory reform must accompany investment, not just investment alone.

The labor market also has much room for improvement. Innovation comes from repeated challenging attempts and failures, but when failure is determined, employment must be flexible enough to allow for redeployment. Otherwise, people will not dare to take risks. In the United States, labor flexibility is somewhat extreme, but in Korea, labor flexibility is too low and needs to be increased to some extent. At the same time, for those who suffer during the process, the government should provide support so that the process is not too difficult.

-What is the top priority for achieving the current administration's goal of a 3% potential growth rate?

▲Ultimately, productivity must be improved. We know the answer. However, regulatory reform and labor market reform are both difficult to achieve. A representative case in regulatory reform is Uber. If Uber had entered the market, related production companies would have developed and productivity would have increased. Incumbents resist during the entry process, which is natural. For example, those who spent over 100 million won to purchase individual taxi licenses would naturally think it unfair if Uber suddenly appeared and operated without a license. At the time, there were discussions about the government purchasing licenses and transitioning to Uber, but ultimately, it was not properly introduced. The conclusion of "let's not do it" is essentially a decision not to increase productivity. We must be able to accept new technologies. The government must play a role in resolving side effects and coordinating among stakeholders during this process, and this is where politics is needed. The most important role of politics is to mediate conflicts, but in Korea, politics sometimes exacerbates conflicts, making the situation very difficult.

The same goes for Airbnb. The situation is similar for autonomous taxis and AI-based medical services. New services always face resistance. To raise the potential growth rate, we must use innovative services to improve productivity. The challenge is how to resolve the inevitable conflicts that arise in this process.

Shin Kwanho, President of the Korean Finance Association, is posing before an interview on the 7th at the Chungkyung Building of Korea University in Seongbuk-gu, Seoul.

-What is the biggest "global variable" for the Korean economy this year?

▲The biggest global risk is the direction of US monetary policy. Inflation has not fallen to the desired level, so the key issue is how much the United States can ease monetary policy in this situation and what impact that will have on financial markets. Other countries have been inclined to raise interest rates. If monetary policies diverge in this way, capital mobility becomes unstable, which could cause global problems. That is my main concern.

The US-China conflict is also a major variable. There are no real laws in the international order. Until now, the United States, as a "superpower," set the rules, and others implicitly followed them. Now, the United States is acting less as a rule-setter in international relations and more in its own national interest, effectively eliminating the rules. In such a situation, countries are deeply concerned about what to do. If the implicit support provided by the United States disappears, the range of actions available to major powers expands significantly. The question is how far China will go, especially since China has invested heavily in Venezuela's oil resources, so how much it will tolerate recent US actions is a key point. The United States and China are also competing for supremacy in AI, and I think the US-China dispute over Taiwan, which plays a key role in the semiconductor value chain, will intensify further.

-What is your assessment of the current high exchange rate situation?

▲Promises of investment in the United States and other factors have led to heightened expectations, causing a temporary supply-demand imbalance. Many people expected the exchange rate to exceed 1,500 won, so they held onto their dollars, pushing the exchange rate up to the high end of the 1,480 won range. However, I believe this level is excessive. It will not be easy for the rate to keep rising past 1,500 won. However, considering the investments we have committed to and other factors, I also think it will be difficult for the rate to fall below 1,400 won.

Another point is that, like Japan, as economic vitality declines and growth slows due to aging, there is a tendency to invest overseas. Japan, with growth below 1%, has invested massively abroad. The same phenomenon is now occurring in Korea. Compared to the past, this trend has strengthened, leading to a higher won-dollar exchange rate.

Exchange rates are determined by interest rate differentials and growth rates. We are at a disadvantage in both respects. Korea now has lower interest rates and lower growth than the United States. A widening growth gap means Korea is increasingly likely to become relatively less affluent compared to the US. This is closely related to the potential growth rate. I believe that raising the potential growth rate, if not to 3%, then at least to 2%, is a very important policy goal for the country.

Shin Kwanho, President of the Korean Finance Association, is being interviewed on the 7th at the Jeonggyeong Building of Korea University in Seongbuk-gu, Seoul.

-What direction should real estate policy take this year?

▲It is a difficult issue. Because the problem has worsened so much, drastic measures such as the Land Transaction Permit System have been implemented, but I am skeptical about their effectiveness. Last year, during the normalization process, housing prices surged, so caution is warranted, but normalization is necessary.

It seems impossible to prevent housing prices from rising in certain areas. Rather than focusing too much on this, the priority should be to ensure that the general public has no difficulty living in their homes, and to focus on providing stable housing for the general population, not just a select few. However, in Korea, when housing prices rise in key areas, everyone pays attention and it becomes a politically sensitive issue, so I am not sure how feasible this is, but I believe normalization is the right direction.

-What institutional incentives exist for expanding "productive finance"?

▲As President of the Korean Finance Association, I held a symposium on productive finance with the Bank of Korea. One of the main points was to activate the capital market so that companies can raise funds smoothly, and that seems to be progressing to some extent. Stock prices are rising, and the government is moving toward normalizing the capital market by revising the Commercial Act.

The problem lies in venture capital. Promising companies must be discovered at the pre-capital market stage so that they can grow and enter the capital market, but we face many difficulties at this stage. Not many countries have vibrant venture capital sectors. The United States, centered on Silicon Valley, is a prime example, and China has developed to some extent as well. These countries have such large markets that there are many incentives to start businesses. Korea does not have this market scale, so there are more obstacles, such as the need to attempt global expansion. Another country where ventures thrive is Israel, which provided incentives for US venture capital to invest, thereby fostering relationships and growing the venture ecosystem together. It is necessary to try various models.

-What should be the government's top policy priority this year?

▲While there is limited room for maneuver in monetary policy, fiscal policy is different. In the long term, fiscal conditions are not easy, but for now, national debt is not particularly high. Since national debt is measured as a ratio to GDP, if fiscal spending is used well and GDP grows, the government debt ratio can also be reduced. Last year, fiscal policy focused too much on consumption coupons and was less effective. From this year, I think it would be better to implement more sophisticated and effective fiscal policies that truly help those in need and improve economic growth from a productivity perspective.

-What are the key issues in introducing stablecoins?

▲The Korean won stablecoin represents a point where two worldviews-existing financial discipline and innovation-collide head-on, going beyond simply being a new payment method. The two systems fundamentally differ in how they build trust. The focus should be on maximizing the benefits and controlling the risks that arise at this intersection.

There are three main issues in integrating the Korean won stablecoin into the regulatory framework. First, how to design the issuer, the scope of reserve assets, and the redemption and resolution procedures to ensure that redemption promises are honored even in crises. Second, how to manage the interface (on/off ramps) with legal tender and how effectively to implement identity verification. Third, to what extent to allow cross-border transfers and use for international settlements. If the system is inadequate, there will be greater gaps in controlling illegal fund movements and money laundering, and large-scale redemptions (coin runs) and liquidity crunches could interact with vulnerabilities in traditional finance to create systemic risks.

Shin Kwanho, President of the Korean Finance Association, is posing before an interview on the 7th at the Chungkyung Building of Korea University in Seongbuk-gu, Seoul.