Korea’s central bank chief defended the acting president’s controversial decision to name two Constitutional Court justices, underscoring the threat posed by ongoing domestic political uncertainties as major stumbling blocks for the Korean economy.
Bank of Korea (BOK) Gov. Rhee Chang-yong conceded in a New Year’s message released Thursday that key rate setting alone is not sufficient to stabilize an economy weighed down by a weak won, consumer demand as well as uncertainties at home and abroad.
“Under the current circumstances, it is challenging to stabilize our economy through monetary policy alone,” he said, adding that filling the leadership vacuum remains the top priority to secure credibility.
Touching upon acting President Choi Sang-mok’s move to fill two of the three court vacancies for the review of President Yoon Suk Yeol's impeachment, Rhee defended it as inevitable for the sake of economy.
“While assessments may differ depending on vested political interests, acting President Choi Sang-mok was forced to make the decision in a best effort to avoid a leadership void and a possible decline in the country’s external credibility,” he said, calling the decision “the first step in proving that the economic system runs independently of the political process.”
As for the direction of benchmark interest rates, it will be done “in a flexible and adaptive manner” as the BOK reverses from a restrictive stance toward an easing cycle.
Looking back at 2024, Rhee's message cited taming inflationary pressure as one of the major economic achievements. Consumer price index growth peaked at 6.3 percent in July of 2022, but the rate has been below the 2 percent range since last September.
Still, the country faces a wide range of downside risks as exports are centered around a handful of sectors such as semiconductors and automobiles.
“The country tends to undergo drastic ups and downs in exports, hit by the cyclical pattern of certain industries, while China is catching up in mainstay exports,” the governor said, “Meanwhile, over the past decade, new export items from emerging industries were barely developed.”
Financial Services Commission Chairman Kim Byoung-hwan echoed the stance, saying in a New Year's message that the regulator will prioritize calming the markets.
Jeong Eun-bo, CEO of the Korea Exchange, said that the operator of the country's main market indexes will focus on addressing the so-called Korea discount through the government's value-up initiatives.
