NEWSMAKERS | SOUTH KOREA
A three-term member of the parliament and a close confidant of president Park Geun-hye, former Industry and Energy minister Choi Kyung-hwan got off to a quick start when, on July 18, he became South Korea’s new Finance chief. Appointed as part of Park’s cabinet reshuffle—in the wake of the Sewol ferry accident in April that killed more than 300 people—Choi had been on the job only a few days when he unleashed a $40 billion stimulus plan to revitalize the country’s faltering economy, a package equivalent to almost 3% of GDP.
The response was immediate. Markets pushed up the benchmark index, and hopes of an imminent rate cut bolstered bond prices, making it all too easy—after “Abenomics” entered the jargon in Japan and “Modinomics” in India—to dub the new minister’s hands-on approach “Choinomics.”
“South Koreans have high expectations for what their government can accomplish, and president Park has fed those expectations by announcing ambitious goals for growth,” says Marcus Noland, senior fellow and director of studies at the Peterson Institute for International Economics: “Unfortunately, her statements never seemed backed up by a real program. Now, with this latest cabinet shake up, she has installed [a] Finance minister who should prove more aggressive than his milquetoast predecessor.”
Choi is proposing extra spending, eased mortgage limits and a tax on excess corporate cash reserves. The challenges he faces, however, are daunting: “Trend growth rate is slowing due to poor demographics and dissipated opportunities for easy technological catch-up, to name a few reasons, and for the first time in two generations South Korea is growing more slowly than the world average,” says Noland.
Choi will need more than quick fixes to jump-start Asia’s fourth-largest economy.