It is always heartwarming to meet a close friend after a long time. I experienced such a joyful moment last week when I reunited with a former colleague I had worked with at the same company, in the same area of macroeconomic reporting, after many years, during his visit to Seoul for a holiday. We discussed many topics, ranging from our daily lives since leaving the company several years ago to our thoughts on the outcome of the US presidential election -- which had been decided just hours befor

Viewpoints Nov. 11, 2024

South Korea’s economy posted surprisingly weak growth in the third quarter, as exports declined due to cooling demand from major markets like China, while construction investment plummeted amid a persistent slump in the domestic real estate market, according to official estimates from the central bank. Disappointing growth and slowing inflation typically point to a need for loosening in monetary policy to support the economy. However, most analysts predict the Bank of Korea will not lower

Viewpoints Oct. 28, 2024

There were two major events this week that surprised many people watching South Korea, myself included. First, a South Korean novelist won the Nobel Prize in Literature for the first time in the country's history, marking only the second time the country has won a Nobel Prize in any field. Her fans, fellow citizens and the whole world joined together in congratulating the novelist, Han Kang, on being awarded the world’s most prestigious literary prize. Of course, I was among them, but

Viewpoints Oct. 14, 2024

While there is no official definition agreed on globally, zombie firms are widely referred to as those that are risky, unproductive and unviable, yet which still manage to avoid immediate default, most likely thanks to continued support from banks, investors or governments, in light of misaligned incentives. The existence of zombie firms can be said to be inevitable for any country adopting market capitalism, at least for a certain period and under certain conditions, such as immediately after u

Viewpoints Sept. 30, 2024

An efficient economic policy is not necessarily one that simply achieves its intended goal regardless of side effects, but rather one that economic players trust, believing it was based on a correct assessment of the situation and expected effects from the policy. Measured against this criterion, South Korea’s recent policies and top officials' comments on rising house prices in the capital area fall short of being efficient -- not because they will fail to curb housing prices, but be

Viewpoints Sept. 2, 2024

While South Korea's economy appears to sustain growth thanks to robust exports of a few big-ticket items, a slew of statistics released in recent weeks points to a deepening slump in domestic consumption. Against this backdrop, policy authorities seem to lack both the will and the tools to change course. Statistics Korea’s retail sales index fell 2.9 percent in volume terms during the second quarter of this year compared to the same period in 2023, marking the worst drop in 15 years s

Viewpoints Aug. 19, 2024

In countries like South Korea that adopt the presidential system of government, the president can wield much stronger power than the prime minister under the parliamentary system because the president usually rules for a fixed period. Accordingly, comments by the president or presidential officials on specific issues can carry a much stronger and wider impact on people’s lives as well as financial markets. At the same time, their comments sometimes have a different type and magnitude of im

Viewpoints Aug. 5, 2024

The Bank of Korea governor’s news conference on its monetary policy, held early this month, was largely successful by signaling to the markets that it would not rush to begin lowering interest rates despite a slump in domestic demand. However, it was less successful in providing clear guidance on conditions under which it might begin doing so. There is nothing wrong with the long-standing practice of South Korea’s central bank avoiding making explicit promises about the future course

Viewpoints July 22, 2024

One of the most frequently discussed phrases this year in South Korea regarding the economy and financial markets was "Korea Discount,’" and the government has made addressing this issue one of its top economic policy goals. In fact, President Yoon Suk Yeol has presided over high-profile meetings to discuss ways to address the issue, and relevant government agencies have either taken steps or promised to do so. The phrase "Korea Discount" refers to the local stock m

Viewpoints July 8, 2024

South Korea again failed to obtain the reclassification of its stock market as a developed market by global index provider MSCI after the country reimposed a full ban on stock short selling, which overshadowed positive assessment among foreign investors of the country’s efforts to lower the barrier for access to financial markets here. According to a statement released last week, Morgan Stanley Capital International recognized and welcomed some of the measures that South Korea has announce

Viewpoints June 24, 2024

Among numerous indicators used to measure a certain aspect or aspects of economic activities, labor market statistics are widely known for reflecting economic conditions belatedly compared to some other leading indicators such as sentiment indices. Moreover, labor data is one of the least dynamic indicators in South Korea due to the country’s rigid labor market structure. In contrast to countries with more flexible labor market structures, such as the United States, the unemployment rate i

Viewpoints June 17, 2024

South Korea’s revised gross domestic product data, released late last week, showed its economy grew at the fastest rate in just over two years during the first quarter of this year. While the overall growth rate matched the earlier official estimates, details from the revised data raise a louder alarm about the magnitude of the slump in domestic demand. The country’s GDP grew by a seasonally adjusted 1.3 percent in the January-March period over the previous quarter, the same as the o

Viewpoints June 10, 2024

South Korea’s stock prices fell for the past two consecutive months, pushing the main board’s benchmark index below its starting point for this year and faring worse than many indices in major countries worldwide. Moreover, the disappointing performance of the country’s share prices contrasts with some signs of improving economic growth in recent months. The Korea Composite Stock Price Index, or Kospi, fell 2.1 percent in May after losing 2 percent in April. This follows a st

Viewpoints June 3, 2024

South Korea’s labor market remains strong even as the country’s economy went through one of the toughest years in history during 2023, according to official figures. It is fortunate, given that weak exports and depressed domestic demand have combined to bring gross domestic product growth down to the lowest in modern history last year except for crisis years. On a four-quarter moving average basis, the country’s employment rate for the whole population aged 15 years or older st

Viewpoints May 27, 2024

The Korea Development Institute’s revised economic forecasts and comments, released last week, contained sources of confusion for investors regarding the central bank’s monetary policy direction for the rest of the year because it warned against tying the country’s interest rate policy too closely to that in advanced economies. In its biannual event, South Korea’s most influential research institute upgraded this year’s economic growth forecast to 2.6 percent from 2

Viewpoints May 20, 2024

President Yoon Suk Yeol promised to do his best to control consumer prices as he resumed activities to interact directly with the public on Friday for the first time after the ruling party’s crushing defeat in the early April parliamentary election. The government also announced fresh measures to help counter the surging cost of living, led by rising food prices. This came a day after Yoon apologized for failing to solve the issues people face during his first news conference in nearly two

Viewpoints May 13, 2024

Some of the business irregularities involving MG Community Credit Cooperatives, better known as Saemaul Geumgo within the country, have again grabbed media headlines in recent weeks, even as their stretched exposure to the depressed real estate market remains a potential risk to South Korea’s financial stability. The Korea Economic Daily and other local media reported that Saemaul Geumgo cooperatives paid out some 500 billion won ($367 million) in dividends to their members last year, more

Viewpoints May 7, 2024

South Korea's economy expanded at a much faster pace than expected in the first quarter of this year, offering relief to those concerned about the severe slump experienced last year persisting for an extended period. This news is especially welcome for a country still grappling with domestic instability and uncertain global geopolitics. However, beyond the social and political instability at home and longstanding global geopolitics, there are other pressing issues that demand attention: t

Viewpoints April 29, 2024

South Korea's significant household debt burden has long been recognized as one of the top risks facing the country's overall economy, positioning the nation near the top of the list among the world's major economies. Given this risk, every administration has made containing household debt one of its top economic policy goals. The Yoon Suk Yeol administration was no exception, emphasizing the importance of containing household debt, along with government debt, since Yoon's in

Viewpoints April 22, 2024

The crushing defeat of President Yoon Suk Yeol’s party in last week’s nationwide parliamentary election casts a dark cloud over the fate of his administration’s various reform plans as well as its ability to manage national affairs efficiently. His administration will face difficulty implementing many of its announced policies and creating new ones. It is the first time under the current Constitution that a sitting president’s party has failed to win the majority in parli

Viewpoints April 15, 2024