1st Macroeconomic and Financial Market Stability Meeting of 2021
Government, BOK and Financial Regulators
to Work Together for Turnaround
Deputy Prime Minister Hong Nam-ki presided over the 1st Macroeconomic and Financial Market Stability Meeting of 2021, held on February 18, where he met the Bank of Korea governor and the heads of financial regulators[1], and the participants discussed ways to prepare for virus uncertainties and help the economy turn around. DPM Hong talked in his keynote address about the government plans to continue with expansionary fiscal policies for a while and ways to avoid possible risks from QE, as well as insisted on working ceaselessly to be adequately prepared for future challenges, such as industrial restructuring and demographic changes. Here is a summary of DPM Hong’s keynote address.
Today’s meeting: Calling for close cooperation
The government, backed by the support from the central bank and financial regulators, has been able to successfully carry out a total of 310 trillion won worth of support measures, including four supplementary budgets planned last year. Uncertainties lingering over the pandemic, thus there being concerns about their impact on the economy, it is time for us to work more closely to successfully ride out the situation.
The economy has fared well so far
Although the economy saw a contraction of one percent in 2020, signs of recovery have recently appeared in exports and investment, along with improving composite leading indicators and consumer sentiment indicators. Furthermore, sovereign credit ratings and financial conditions indicators remained stable in 2020. Given positive global growth outlooks by the IMF and OECD, as well as recent vaccine rollouts and falling new virus cases, the Korean economy is expected to begin to recover this year. To help ride on positive global economic developments, we have to focus our policies on overcoming the crisis, effectively managing risks and seizing growth opportunities.
2021 Frameworks to respond to uncertainties
We will do the following to successfully ride out the crisis and help the economy gain growth momentum.
- Maintain expansionary fiscal and financial policies no matter how big or small: Plans including a total of 495 trillion won worth of policy-based financing, as-early-as-possible budget spending and supplementary budgets
- Decide on whether or not to extend support measures: Extend the measures if they are directly related to virus-hit businesses and individuals, and review other measures, such as the loan repayment extension, as to whether or not to extend them
- Work to avoid risks from QE: Such risks as too much liquidity flowing into property markets, rising household debt, prices increase and financial market volatility
- Promote investment in new growth engines, such as the Korean New Deal projects, to guide excess liquidity to more productive sectors
- Continue to work on industrial restructuring, demographic changes and other future challenges, as well as prepare for a post-corona economy, such as through the Korean New Deal, BIG3 promotion and venture startup support
