South Korean President Moon Jae-in held an unplanned emergency economic ministerial meeting on Thursday. It was quite unusual for the president to suddenly preside an economic meeting, especially when Deputy Prime Minister for Economy Hong Nam-ki was on an overseas business trip. “The private sector should be invigorated to boost the economy,” said Moon. “We need to do our best to create an environment that encourages companies’ investment by accelerating regulation reform.” It is reassuring that the president recognized the issues of the current economic situation and emphasized the importance of the private sector, however, what truly matters is how much of his messages will be implemented on the ground.
The Monetary Policy Board of the Bank of Korea lowered the country’s base rate from 1.50 percent to 1.25 percent on Tuesday and mentioned the possibility of further reductions depending on future circumstances. This demonstrates how grim the current economic situation in South Korea is deemed. The International Monetary Fund has also recently decreased the economic growth forecast for the country significantly from 2.6 percent to 2.0 percent. Many private institutions abroad even predicted lower than two percent. South Korea’s gross domestic product per capita reached 30,000 dollars last year, yet it is concerning that the figure may fall back below the 30,000-dollar mark with the current rate of the economic slowdown. In fact, several countries, including Spain and Greece, have experienced the same course.
As the economic downfall seems to worsen and businesses complain of financial difficulty, the South Korean government is pursuing measures to complement the 52-hour workweek system. Penalties placed on small- and medium-sized companies with less than 300 employees subject to the 52-hour work limit may be suspended for six months and the scope in which more than 12 hours of overtime work per week are allowed may be expanded. However, rather than suspending penalties for six months, more fundamental solutions, such as diversifying the limited working hour system by sector, should be implemented to address uncertainties in the market and challenges faced by companies.
President Moon ordered the increase of construction investment, including social overhead capital investment and the early construction of metropolitan transportation network. The government has insisted on avoiding excessive interventions to boost the economy, but appropriate construction investment is an effective way to overcome an economic downturn and create a new investment driver, which means there is no reason to turn away from necessary investment in construction. The government now should accelerate the execution of pre-planned finance while boosting investment in the private sector. The National Assembly should also help to resolve challenges experienced by businesses by quickly passing three major data laws and economy-related bills, such as the flexible work hours system.