Building back better in South Korea with green, digital tech

South Korea wants to become a leader in next-generation cars, healthcare and low-emission technologies to grow its economy.

South Korea's economy is projected to shrink by 1.1 percent this year but has so far managed to avert the deep contractions suffered by other big economies [File: SeongJoon Cho/Bloomberg]

South Korea aims to focus on green and digital industries as it looks to boost its standing in the global economy, according to a senior policy maker working on next year’s economic plan.

The government is putting together a list of industrial priorities that would raise the economy’s growth potential, while taking advantage of a speedier-than-expected recovery from the pandemic, Lee Hyoung-il, director general at the finance ministry’s policy bureau, said in a phone interview.

“We should use this opportunity to rebuild the economy into one that leads others,” he said, in a remark echoing Joe Biden’s call to “build back better” the U.S. economy. “Going digital and green is of the essence,” Lee said.

Future cars, biohealth, system semiconductors and low-carbon emission industries are among the industries the government will focus on going ahead, Lee added.

South Korea vs OECD GDP forecasts chart [Bloomberg]

The comments from Lee, an architect of the 2021 economic policy outline to be unveiled later this month, reflect a growing awareness among global policy makers and companies that a post-pandemic economy should focus on fighting climate change and ensuring business sustainability.

South Korea has so far managed to avert the deep contractions suffered by major economies thanks to quarantine efforts that made a strict lockdown unnecessary, and support from tech exports such as demand for memory chips, which grew during the pandemic.

Still, the economy is projected to shrink 1.1% this year and has been shedding hundreds of thousands of jobs almost every month. The damage from the pandemic may last beyond a normal economic cycle as seen in the aftermaths of the 1990s Asian financial crisis and the 2008 global credit crunch, Lee said.

“A scarred economy always comes back only halfway rather than all the way,” he said. “We don’t want to allow that this time,” Lee said, adding that the goal is to build an economy next year that’s stronger than it was in 2019.

Asked about next year’s GDP growth forecast, a key component of the policy outlook, he declined to give an estimate but noted a growing consensus of around 3% among other economic institutions.

Bank of Korea Governor Lee Ju-yeol said last week the economy would probably grow 3% next year provided global commerce returns along with investment.

Recent data have raised optimism over South Korea’s recovery, with exports and manufacturing activity posting robust gains and third-quarter growth proving stronger than first thought. While consumption is still lagging the overall recovery, Korea’s high mobile and broadband penetration has helped limit the coronavirus blow to household spending as online and mobile platforms flourished.

The finance ministry’s Lee said he sees positive signals from forward indicators, pointing to increases in the coincident and leading indexes in recent months.

He declined to comment on recent won strength.


Source: Bloomberg