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Korea to focus on economic ‘structural reform’ in 2015
By Shin Ji-hyePublished : Dec. 21, 2014 - 20:48
The government is expected to announce Monday its economic policy priorities for next year, which will center on structural reform.
Deputy Prime Minister and Finance Minister Choi Kyung-hwan hinted at the policy direction Friday, saying that as economic uncertainty and structural vulnerability have slowed recovery, the government plans to focus on structural changes to the economy.
His remark came amid a slower-than-expected economic recovery, despite the government’s latest expansionary policy along with two key rate cuts by the Bank of Korea, industry watchers said.
The BOK’s recent remarks are in line with the minister’s view. On Friday, BOK monetary policy committee member Ha Sung-keun stressed the structural reforms, saying, “Monetary policy works only when economic fundamentals are strong.”
Bank of Korea Gov. Lee Ju-yeol said, “Despite the two key rate cuts, the real economy has not recovered due to structural reason,” after the key rate was frozen on Dec. 11.
“Abenomics’’ is losing steam in Japan because it solely relies on expansionary monetary policies and ignores structural changes, Lee added.
The government’s structural reforms for next year are expected to focus on the public sector, labor market and finance industry, industry watchers said.
The government has shown a strong willingness to deal with chronic debt problems in the public sector, along with reforming the pension scheme for public workers. The state-run think tank Korea Development Institute went further to call for mergers of public organizations that have performed sluggishly or have overlapping businesses.
The Finance Minister reemphasized the need for reform in the labor market, saying overprotection of regular employees hinders companies from hiring new ones.
He said there would be various ways to reform the market including changes to the wage system, though such moves have brought about strong criticism from workers.
Reform measures in the financial industry are also expected. Choi repeated, “The finance industry has not been working properly,” citing its diminishing contribution to the gross domestic product and the loss of in 50,000 jobs over the past year.
By Shin Ji-hye (shinjh@heraldcorp.com)
Deputy Prime Minister and Finance Minister Choi Kyung-hwan hinted at the policy direction Friday, saying that as economic uncertainty and structural vulnerability have slowed recovery, the government plans to focus on structural changes to the economy.
His remark came amid a slower-than-expected economic recovery, despite the government’s latest expansionary policy along with two key rate cuts by the Bank of Korea, industry watchers said.
The BOK’s recent remarks are in line with the minister’s view. On Friday, BOK monetary policy committee member Ha Sung-keun stressed the structural reforms, saying, “Monetary policy works only when economic fundamentals are strong.”
Bank of Korea Gov. Lee Ju-yeol said, “Despite the two key rate cuts, the real economy has not recovered due to structural reason,” after the key rate was frozen on Dec. 11.
“Abenomics’’ is losing steam in Japan because it solely relies on expansionary monetary policies and ignores structural changes, Lee added.
The government’s structural reforms for next year are expected to focus on the public sector, labor market and finance industry, industry watchers said.
The government has shown a strong willingness to deal with chronic debt problems in the public sector, along with reforming the pension scheme for public workers. The state-run think tank Korea Development Institute went further to call for mergers of public organizations that have performed sluggishly or have overlapping businesses.
The Finance Minister reemphasized the need for reform in the labor market, saying overprotection of regular employees hinders companies from hiring new ones.
He said there would be various ways to reform the market including changes to the wage system, though such moves have brought about strong criticism from workers.
Reform measures in the financial industry are also expected. Choi repeated, “The finance industry has not been working properly,” citing its diminishing contribution to the gross domestic product and the loss of in 50,000 jobs over the past year.
By Shin Ji-hye (shinjh@heraldcorp.com)
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