Listen to this article
South Korean president Moon Jae-in on Friday replaced two key economic officials, including the finance minister, as pressure mounts on his administration to kick-start growth in Asia’s fourth-largest economy.
Economic issues have moved to the forefront of South Korean politics in recent months as slowing growth and weakening jobs data weigh on the president’s approval rating.
The issue is particularly important for Mr Moon, who was elected last year on the back of populist pledges to create jobs and reduce inequality in a nation that has for decades been dominated by a handful of wealthy conglomerates.
However, his efforts, which included raising the minimum wage in a bid to spur consumption, have fallen flat.
The Bank of Korea had cut its gross domestic product growth forecast for this year from 3 per cent to 2.7 per cent, as global trade tensions weigh on the export-dominated economy.
Unemployment has also been ticking up as traditional manufacturing industries, such as shipbuilding and automobiles, shed jobs amid increasing competition from lower cost Chinese rivals.
On Friday, Mr Moon moved to revitalise his economic team by replacing Kim Dong-yeon, finance minister, and Jang Ha-sung, presidential chief of staff for policy.
The two officials had themselves clashed in recent weeks, with Mr Kim pushing to depart from Mr Moon’s trademark “income-led growth” policy that seeks to create a virtuous cycle of increased incomes, consumption and employment.
Mr Jang, considered the architect of the trickle-up policy, publicly disagreed with Mr Kim.
The reshuffle sets the stage for new economic ideas in a nation that is struggling to transition away from its once-successful manufacturing model.
However, Mr Moon on Friday doubled down on his commitment to a “fair economy” that does not only enrich the country’s conglomerates, known as the chaebol.
“In the past, our people worked day and night under the goal of building a well-off nation and became an economic power . . . in just half a century, but fairness was lost in the course of economic growth. Those jointly achieved results were claimed by the conglomerates,” he said.
“Realising economic democracy through a fair economy is the way to make ordinary people, back-alley businesses, small and medium-sized enterprises, and conglomerates well-off together.”
The rhetoric is a common refrain in South Korea, where the family-run chaebol turn immense profits, while small and medium-sized enterprises, which employ the majority of the population, struggle.
Critics point out, however, that the Moon administration has done little to tackle the dominance of the conglomerates since it came to power. After an initial push, corporate reform efforts have stalled.
“It appears the president is going to stick with the current income-led growth policy,” said Yoon Chang-hyun, a former president of the Korea Institute of Finance. “People will ask: ‘Why change the officials if you don’t intend to change the policies? It is a waste of time’.”
Mr Kim, the sacked finance minister, will be replaced by Hong Nam-ki, an economic policy official currently serving in the prime minister’s office.
Additional reporting by Kang Buseong