South Korean president-elect Park Geun-hye appointed Hyun Oh-seok as finance minister as she installs a new government to boost economic growth and tackle a strengthening currency.
Hyun, currently head of the state research center Korea Development Institute, will also become South Korean deputy prime minister for economy, a signal that Park will make spurring growth in Asia’s fourth-biggest economy a top priority. Kim Yong-jun, head of Park’s transition team, announced ministerial appointments yesterday in Seoul at a briefing televised by broadcaster YTN.
South Korea’s incoming leadership, set to take office on Monday next week, will oversee an economy that last year expanded 2 percent, the slowest pace since annual growth fell to 0.3 percent in 2009. GDP increased 1.5 percent last quarter from a year earlier, less than analysts forecast, as a 23 percent gain in the won against the yen over the past six months threatens to restrain exports this year.
“The short-term challenge is how to secure a rapid economic recovery,” Hyun said at a briefing yesterday, without commenting on the currency. “The long-term challenge is how to coordinate between growth and welfare and improve our growth potential.”
Park also appointed South Korean Vice Minister for Industry and Trade Yoon Sang-jick, as minister in charge of trade, industry and energy.
Jeong Kim, president of Bell Labs and chief strategy officer of Alcatel-Lucent, was named science minister and Ryoo Kihl-jae as unification minister. The appointees are subject to a parliamentary hearing at the South Korean National Assembly, where Park’s New Frontier Party has a majority.
“The new finance minister, now elevated to deputy prime minister, will have unusually strong power, probably unseen since Park Chung-hee’s regime, encompassing all economic policies from budget to international trade,” Lee Sung-kwon, an economist at Shinhan Investment Corp in Seoul, said before the announcement.
He was referring to the incoming president’s father, who oversaw South Korea’s economic rise through the growth of automaking, steel and shipping until his assassination in 1979.
“We’re facing another currency war, which requires a financial chief who can really navigate the tough waters for South Korea,” Lee said.
Hyun, 62, has a doctorate in economics from the University of Pennsylvania and worked for the World Bank and South Korea’s finance ministry before becoming head of the nation’s top research body in 2009, according to KDI’s Web site.
He is a long-time policy adviser to the Bank of Korea and the government. One of his predecessors at KDI was Bank of Korea Governor Kim Choong-soo.
The Bank of Korea reduced its projection for this year growth to 2.8 percent from 3.2 percent on Monday last week and kept interest rates on hold at 2.75 percent on Thursday, highlighting obstacles to a rebound that include record household debt and a stronger won.
“The new finance chief will face pressure to introduce a supplementary budget as fiscal stimulus is set to play a bigger role in Korea’s recovery,” Ronald Man, a Hong Kong-based economist at HSBC Holdings PLC, said before the announcement.
Policymakers also face a working population that is expected to start shrinking in 2017 with a birth rate of 1.24 children per woman as of 2011, according to a finance ministry report last year.
“In the long term, Korea needs to outline a fiscal strategy to slow the impact of an aging demographic” to keep growth momentum, said Leong Wai Ho (梁偉豪), a senior regional economist at Barclays PLC in Singapore.