Think tanks call for regulatory reforms, rate cuts

(Gettyimagesbank)

South Korea needs regulatory reforms, a restructuring of the self-employed sector and further interest rate cuts, according to the heads of major think tanks.

Maeil Business Newspaper published a survey on Sunday amid concerns over the nation’s economy, which is rapidly losing vitality due to low birth rates, distorted labor structures, less competitive high-tech industries, and high interest rates.

The survey included the heads of five major think tanks: the Korea Development Institute, the Korea Institute for Industrial Economics and Trade (KIET), the Korea Institute of Finance, the Korea Economic Research Institute (KERI) and LG Business Research.

The think tank leaders emphasized the need for broader economic reforms, such as improving labor productivity and attracting talent in high-tech fields, in addition to regulatory reform and sectoral restructuring. They warned that failure to act now could result in missing a critical window of opportunity that could in turn lead to a prolonged recession.

KIET President Kwon Nam-hoon called for measures such as easing household debt and restructuring the self-employed sector to strengthen the economy’s resilience. He also stressed the need for “direct subsidies” to support Korean semiconductor companies in the global chip race for supremacy. “Semiconductors are a core industry for our economy and a strategic asset contributing to national security,” Kwon said.

Experts also agreed on the need for further interest rate cuts. KERI President Chung Chul said it is “unfortunate” that the interest rate remains high amid weak domestic demand as “the full impact of the rate cuts will not be felt until the middle of 2025.” According to data from the National Assembly’s audit of the Ministry of Economy and Finance, the Organization for Economic Cooperation and Development (OECD) estimated Korea’s potential growth rate at 2 percent this year, down from 2.4 percent in 2021 - a 0.4 percentage point decline within a three-year period.