New Korea Development Institute (KDI) President Kim Se-jik said at his first press briefing after taking office on the 10th that "there are cases where we need to be bold (with fiscal policy) for economic growth."
Kim said that "when the economy is in a phase of restoring its long-term growth rate, it is reasonable, as pain relief, to use the budget if the hardships of vulnerable groups, the self-employed, and small business owners intensify." He added, "If recent unrest in the Middle East worsens the difficulties of vulnerable groups and small business owners, it is reasonable to use fiscal resources for them."
However, he criticized previous administrations' stimulus policies. He said, "Aggregate-demand stimulus such as the Bank of Korea's rate cuts since 2014 failed to lift the long-term growth rate, and only pushed up real estate prices and household liability." He went on, "Past administrations' stimulus policies were close to 'fake growth policies' and amounted to a flash in the pan."
Kim warned that if Korea fails to resolve its structural low-growth problem, real gross domestic product (GDP) will peak in 2029 and then head downhill. He said, "Over the past 30 years, regardless of which party was in power, Korea's long-term growth rate fell by 1 percentage point every five years, dropping into the 0% range."
Kim said that to rebound the long-term growth rate, policies are needed that build human capital and foster creative ideas. He then proposed a "nationwide idea contest." The idea is to have citizens propose innovative ideas to the government, guarantee ownership, and provide economic rewards.
Kim took office as KDI president on the 9th of last month for a three-year term. Born in 1960, he graduated from the economics department at Seoul National University and received a Ph.D. in economics from the University of Chicago. After working at Ssangyong Investment & Securities, he served as a senior economist at the International Monetary Fund (IMF) and then taught macroeconomics, economic growth, and the Korean economy for more than 20 years in the economics department at Seoul National University. He also served as an outside director at Industrial Bank of Korea (IBK) and Hanwha Life Insurance.