QE Impact
New York University professor Nouriel Roubini, also known as “Dr. Doom,” remarked that the Fed’s tapering of the quantitative easing policy is likely to be a boon to the Korean economy.
He met with Deputy Prime Minister and Minister of Strategy and Finance Hyun Oh-seok on November 4 and said, “The withdrawal of quantitative easing implies a recovery of the US economy, and thus it is expected to have a positive effect on the economy of Korea, one of its major trade partners,” adding, “The capital inflow to the United States following an interest rate hike and the strong dollar will be positive factors for the Korean economy, too.”
With regard to the Chinese economy, he commented, “The Chinese government has made a large amount of fixed capital investments, but it is not sustainable and it seems that the Chinese economy is predicted to show a growth rate of between 6% and 7% down the road, which is between a hard landing and soft landing.”
He also mentioned the Abenomics policy of Japan. “The response by means of fiscal stimulus has been effective, but it cannot last forever unless there is a structural reorganization with the national budget skyrocketing,” he pointed out.
The professor also said that the Korean government’s fiscal burden imposed by the aging population and the national pension is likely to be a major challenge to the national economy. “Although the country is enjoying some fiscal soundness now, there will be a significant burden if the national pension is depleted with the aging of the population speeding up,” he continued.
The Deputy Prime Minister said in response, “Though the fiscal burden entailed by the aging trend is somewhat inevitable, we are planning to deal with it aggressively by reshaping the welfare delivery systems, extending the retirement age and creating new jobs.”