New BOK Chief Warns Korea 'at Crossroads'

The new governor of the Bank of Korea said Thursday that the country's economy stands at a "major crossroads."

Speaking at his inauguration ceremony on Thursday, Rhee Chang-yong said, "This is a difficult time to project whether Korea's economy will make a leap forward by overcoming the challenges posed by a shift to a new normal following the coronavirus crisis or whether it will sink into secular stagnation due to decreased productivity."

He added that Korea needs to "boldly change its economic framework" and rush to "devise qualitative growth led by the private sector and diversify export and supply networks that have been concentrated on a small number of industries and markets."

Rhee said the days are gone when "economic growth was possible with the government setting policies and everyone working all night."

The BOK chief pointed to income polarization and mounting debt as major threats. "Income polarization could damage economic growth potential," he said. Income disparity is intensifying as Korea shifts to a knowledge-intensive industry, while youth unemployment, poverty among the elderly and regional imbalances are also worsening.

Rhee warned that a chain of household loan defaults could trigger "huge social costs as we experienced in the past," referring to the 1997 Asian financial crisis when Korea turned cap-in-hand to the International Monetary Fund for emergency bailouts.