On August 8, Deputy Prime Minister and Minister of Economy and Finance Koo Yun Cheol met with Moody’s annual consultation team[1] at the Government Complex-Seoul, to discuss Korea’s economic situation and key policy directions.

DPM Koo explained that since the launch of the new administration, political uncertainties surrounding the Korean economy have been fully resolved, and, backed by a stable national system, positive developments – such as improvements in the consumer sentiment index – have recently been observed.

He also noted that, despite the limited time, Korea successfully concluded trade negotiations with the United States under the principle of pragmatic diplomacy in pursuit of the national interest. He expected that the economic relationship between the two countries can deepen and further develop based on the mutually beneficial outcome of the talks. In particular, he emphasized that Korea will turn recent changes in the global environment into new opportunities for its economy by strengthening alliances with the United States in sectors such as shipbuilding, semiconductors, and secondary batteries.  

He went on to say that the government will make all-out efforts to drive a full-fledged transition toward a ‘hyper-innovative economy’ by designating specific hyper-innovation items and building an innovation ecosystem to create world-class products and services. To this end, he expressed confidence that the government will fully mobilize all policy capacities – covering fiscal resources, human resources, taxation, and R&D – and, through collaboration among all economic actors, will deliver tangible results within a short period of time.

In response to Moody’s inquiry regarding the impact of demographic changes, including population aging, on Korea’s medium- to long-term fiscal capacity, he highlighted performance-based fiscal management that provides targeted support where necessary while decisively restructuring unnecessary expenditures. This strategy, he said, will ensure the sustainability of fiscal resources to meet long-term demands while fulfilling their essential role as a catalyst for growth. He also mentioned that the government will manage fiscal policy aiming for a virtuous cycle in which bold fiscal spending generates high-productivity investment effects; such effects will support growth, which will then reduce the debt ratio.

Moody’s concurred with DPM Koo’s explanations and stated that it will closely monitor the evolving developments of Korea’s economy going forward. Meanwhile, it assessed that the launch of the new administration, which ended six-months of political turmoil, has created a favorable political environment for structural reforms and legislative measures to boost potential growth. Regarding Korea’s fiscal situation, it was noted that fiscal costs and debt burdens remain at manageable levels compared to major advanced economies.

The Moody’s team concluded its annual consultation of Korea, which lasted from August 6 to August 8, with a courtesy visit to DPM Koo.