The Korean Economic Association held a symposium on May 15 under the theme of challenges to and solutions for the Korean economy.
At the symposium, Park Myung-ho, head of the Center for Long-term Fiscal Projections of the Korea Institute of Public Finance, said that current national finance is not sustainable in that the managed fiscal balance is increasing its deficit, and the government needs to make efforts to increase tax revenues and spend its resources with greater efficiency while overhauling social security spending in view of the pace of aging and low fertility. “The ratio of social security spending to GDP reflecting population dynamics is estimated to soar from 9.6 percent to 29.0 percent between 2012 and 2060, to exceed the OECD average by approximately 50 percent,” he explained, adding, “Various pensions plans have to be reformed along with social security spending in the medical sector for us to be capable of tackling a fiscal cliff.”
Korea Institute for Industrial Economics & Trade Director Kim Do-hoon expressed concerns over China’s emergence. “Last year, Xiaomi’s mobile market share in China exceeded that of Samsung Electronics, and this means Chinese companies now have technological strength, not to mention a cheap labor force,” he said, continuing, “This situation can be addressed when Korean companies, not the government, are allowed to lead the growth of new industries.” He also pointed out that the lack of technology buyers is one of the biggest reasons for the slow progress of the so-called creative economy held up by the government. “We see more and more venture firms these days, but the number of those investing in them has shown no increase for years,” he added.
Korea Labor Institute Chairman Lee In-jae warned that an employment cliff might appear next year with the extension of the retirement age put into force. “Labor market restructuring is an urgent matter, and examples of the specific measures for it can include a three-day work week, wage peaks for full-time workers, and real wage adjustments based on labor turnover,” he advised.
Lee Il-hyung, head of the Korea Institute for International Economic Policy, mentioned the internationalization of the Korean currency without delay for its resistance to external impacts. “Quantitative easing has caused the U.S. stock market to be overheated, and Korea is likely to be significantly affected when the bubble bursts, because a lot of DLS associated with the market have been sold in it,” he explained, adding, “The global standing of the Korean currency has to be raised for the shock to be minimized.” He mentioned specific ways to reach this goal such as an increased use of the won in international trade and the utilization of China based on the Korea-China FTA and Korea’s accession to the Asian Infrastructure Investment Bank.