Koo Yun-cheol, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, handled major agendas such as U.S.-Korea tariff talks and exchange rate negotiations, and the new administration's economic growth strategy and budget announcement during the 100 days since taking office on July 19. As domestic demand slipped into a slump and U.S. tariff pressure continued, Koo attempted a bold policy shift.
As a result, key economic indicators such as production, consumption, and stock prices are improving, showing a trend of emerging from the weakness in the first half. But Koo still faces no small number of challenges.
◇ Fanning a recovery with the economic growth strategy, expansionary fiscal policy, and stock gains
The Ministry of Economy and Finance, in its economic growth strategy released on Aug. 22, set a goal of achieving "AI top three powerhouses and national strength top five in the world" within the term of the Lee Jae-myung administration. It also unveiled a plan to restore the economic growth rate, projected to be just 0.9% this year, to around 3% going forward.
Koo said, "It is a desperate situation where it is hard to find industries that can support our economy," and assessed, "The era of AI transformation is a Critical opportunity to leap to a leading country, and the next five years are the last golden time." He added, "We must shift the overall national system, designed on a catch-up economy, to a super-innovative leading economy."
Koo also put forward a "Korea Premium" strategy to channel funds concentrated in real estate into the stock market. The policy is gradually showing results. After the Ministry of Economy and Finance (MOEF) signaled the introduction of shareholder-friendly measures such as revising the Commercial Act, the KOSPI index, which was around 3,200 before his inauguration, is now on the verge of breaking above 4,000.
Right before Koo took office, the second supplementary budget drawn up by the Lee Jae-myung administration was deployed for stimulus and stabilizing livelihoods, and production and consumption are also recovering. The consumer composite sentiment index (CCSI), which had fallen to 88.2 at the end of last year due to the aftermath of the martial law crisis, topped 110 for three consecutive months from July to September. The number of employed people last month increased by 312,000 from a year earlier, marking the biggest rise in 19 months.
Koo formalized a shift to expansionary fiscal policy by drafting next year's budget at 728 trillion won, up 8.1% (about 55 trillion won) from this year's main budget (about 673 trillion won). Expectations are therefore rising for an improvement in the economy next year. In its World Economic Outlook released on the 14th, the International Monetary Fund (IMF) projected Korea's growth at 0.9% for this year and 1.8% for next year.
◇ Wrapping up U.S.-Korea tariff talks and reorganizing the MOEF remain tasks
Although Korea's economy is showing a gradual recovery, several challenges still lie ahead for Koo. He focused on tariff negotiations with the United States immediately after taking office, but the talks have yet to conclude. Although he secured an agreement on July 31 to cut tariffs on the United States from 25% to 15%, the talks stalled due to differences over the structure and operation of U.S.-bound investment funds. Koo visited the United States last month and this month in succession and continued consultations with U.S. Treasury Secretary Scott Bessent.
Thus, lowering the size of direct investment demanded by the United States while swiftly concluding the talks remains a key government task. While Presidential Chief of Staff for Policy Kim Yong-beom and Minister of the Ministry of Trade, Industry and Energy Kim Jung-kwan are taking the lead, follow-up implementation is expected to fall to the Ministry of Economy and Finance (MOEF). In the process, sustaining the recovery and minimizing shocks in the foreign exchange market is also an important role for Koo.
The split of the Ministry of Economy and Finance slated for next year is also a core task. As of Jan. 2 next year, the MOEF is set to be divided into the Planning and Budget Office, in charge of budget functions, and the Ministry of Finance and Economy, in charge of tax and coordination functions. A plan to transfer the Financial Services Commission (FSC)'s financial policy functions to the Ministry of Finance and Economy was initially reviewed but fell through, prompting criticism that the ministry "lacks policy tools for economic policy." Voices are even rising within the MOEF that "the Ministry of Finance and Economy should give up its policy coordination function," suggesting Koo will need to exercise considerable leadership to maintain his status as the control tower of economic policy.