Korea beats Japan for 2nd consecutive year in GDP per capita...What's the economic outlook?

■ Host: Anchor Park Seok-won and anchor Jo Su-hyun
■ Starring: Kim Kwang-seok, adjunct professor at Hanyang University

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN Newswide] when quoting.

[Anchor]
It is predicted that Korea's per capita GDP will easily outpace Japan this year following last year.

[Anchor]
This is what was announced in the IMF's World Economic Outlook Report. Korea's economic growth rate is forecast to be 2.5% this year. Let's take a look at various economic indicators, domestic and foreign economic conditions, and Kim Kwang-seok, an adjunct professor at Hanyang University. Welcome.

[Kim Kwangseok]
Hello,

[Anchor]
I think it is a little different from Korea's economic outlook, government forecasts, and Bank of Korea forecasts analyzed by the IMF this year.

[Kim Kwangseok]
There is a slight difference, but it can be seen as the same. This year's growth rate is about 2.4% and 2.5%. It can be seen as similar to KDI, Bank of Korea, and IMF. Currently, the growth rate of major countries in the world is presented like this.

If you look at Korea's growth forecast, the U.S. is 2.8 and China is 4.8 percent, but Korea is 2.5%, which is somewhat higher than that of major advanced countries in the world. However, it is a little lower than in major emerging countries in the world. You can see it like this. Then, there are people who wonder what level this is, but to tell you for a moment, the Korean economy is still a little difficult, so you may wonder what 2.5% of growth is. To explain this, the economy was very bad last year.

Last year's growth rate was 1.4%. We've had four economic crises since 1980, and except for these four, which were almost reverse or zero growth, the growth rate was 1.4% last year, the lowest in 23 years. So, compared to then, GDP has increased by 2.5%, so it's a growth rate based on the base effect.

So the economy, the sluggish domestic economy, and the growth rate of 2.5%, which is different from this, so I'll tell you if you can interpret the meaning of this number well.

[Anchor]
Let's go into detail about the domestic situation now. You mentioned sluggish domestic demand. Didn't the Bank of Korea recently cut interest rates to 0.25%? Do you think changes in monetary policy will affect changes in the domestic market?

[Kim Kwangseok]
First of all, of course, it has an effect. So basically, if I give you a brief explanation of the mechanism of monetary policy in the theory of economics, if you cut interest rates, companies' new investment flows in the real economy. As investment flows in, of course, jobs and employment are promoted. If employment improves, income levels will improve. So what will improve if your income increases?

Consumption becomes more vital. Then, when consumption occurs, companies will want to invest more actively. This can be seen as a basic monetary policy mechanism. So, it can be seen as a rate cut that induces a virtuous cycle of the economy.

However, only a 0.5% rate cut will lead to an explosive recovery in this situation where domestic demand is in such a slump. And I would like to say that it will be difficult to paint rosy pictures that the domestic economy will recover in a short period of time. Of course, there will be an impact from the rate cut, but it will be difficult to conclude that domestic demand will recover significantly or that it will have vitality, so I will give you this opinion.

[Anchor]
And Korea's per capita GDP surpassed Japan for the second consecutive year. So, it was in the order of Korea, Taiwan, and Japan, so how should I interpret this ranking?

[Kim Kwangseok]
First of all, it's good news. As a Korean citizen, we cannot help but think of Japan as a competitor. Wouldn't there be a desire not to fall behind in anything with Japan? As you can see, Korea's per capita GDP has already surpassed Japan in 23. And it's been outpacing 24 years in a row.

However, if I explain this additionally, I would like to explain objectively that Korea's per capita GDP is growing faster than any other country, which is slower than other countries, rather than outpacing Japan, but Japan is lagging far behind, so GDP per capita is moving forward than Japan, which is stepping back. Anyway, that's good news.

It may be considered good news in that GDP per capita is going one step further than Japan, but to encourage growth at a faster pace using this, I would like to suggest that we should create an opportunity to leap forward as more advanced countries by raising the technological level a little more, leaving emerging countries behind technological pursuit with technological hegemony, and pioneering new markets.

[Anchor]
There is also a forecast that Korea's per capita GDP will surpass $40,000 by 2027, which means that, and then, please point out in detail what Korea's GDP surpasses $40,000.

[Kim Kwangseok]
Adam Smith, my favorite, and many people's favorite economist, called the father of economics. Adam Smith left a quote from The Wealth of Nations. No matter how rich a country is, how poor and miserable its people live, but can a country be said to be rich? I keep this sentence in my heart. Same thing.

If a country's economic power grows and technology grows, can it be said that it is a really rich country if the people live poor? You can raise these questions. So, there are limitations not only in GDP per capita, but also in this indicator of GDP per capita.Ma is a representative indicator of how rich each person is on average, so I would like to suggest that it is a symbolic indicator of how rich the Korean people have become.

Also, what this indicator suggests is that our country really jumped $20,000, $30,000, and now there are only about 20 countries that exceed $30,000. That's how rich countries, developed countries, and welfare states. Only these 20 countries exceed $30,000.

But if it exceeds $40,000, it's really in the top 20 countries. As such, it has such a symbolic meaning of leap into an advanced country, and it means that each and every person of the people will become a productive and rich country. However, I think it also suggests that it is a moment to make efforts at the level of political, cultural, and consciousness that match the level of such a country.

[Anchor]
And one of the IMF's warnings is that Korea will explode in the U.S.-China whale fight. In particular, Korea will be more damaged in the hegemony competition between the U.S. and China compared to other countries. How do I see this interpretation?

[Kim Kwangseok]
That's right. Our country is so dependent on trade that a very important announcement this week is the Bank of Korea's third-quarter GDP breaking news. GDP growth in the third quarter was only 0.1% compared to the previous quarter. However, the Bank of Korea's previous expectation was 0.5%, but it fell far short. When I saw why, the export performance I expected didn't come out.

However, this much, we have been relying on foreign exports and so-called exports to induce growth, but if exports do not come out as expected, the Korean economy is structurally falling into the face of a headwind. However, if the U.S.-China hegemony develops and the U.S. is tough on China and China is tough on the U.S., the global value chain is so strong that Korea cannot export to China and Korea cannot export to the U.S. and watch each other's faces. In addition, the tariff war raises tensions in global trade and closes the global trade door.

That's why the trade volume is reduced. Then, Korea's global trade volume will inevitably be reduced. Then, Korea's growth plate will be closed. Therefore, it is inevitable that Korea will have more difficulty in such a situation in which tension in trade is created, so as the IMF warns, Korea has to think more carefully about countermeasures.

[Anchor]
Many people now see the U.S. presidential election as a variable, and if former President Trump is elected again, what do you expect to see the impact on our economy?

[Kim Kwangseok]
When it comes to Trump, there are many things we need to think about. I already have to talk about that topic for an hour, but I'll present one keyword. Trump brings the direction of this trade war into a tariff war. So please remember this word. It's a tariff war.

It's true that Harris and the big difference will lead to a trade war, both. They're both right, but Trump's characteristic is that he will lead a trade war with a methodology called a tariff war. And then we're going to really bring the retaliatory tariff rate up to 100% on China, and we're going to bring the tariff rate up to 10% on foreign countries, so on any country other than China, and we're going to really bring it up to an era of protectionism.

So what's really scary about this is what other neighboring countries doing business with the United States do if the United States raises tariff rates? It also raises the tariff rate. So what will be the trade volume if we raise the tariff rate globally? The door to trade is closed.

As I said earlier, when the door to trade gradually closes, this is not a global value chain, but a domestic value chain. That's why we're going to focus on the domestic economy in our own country. Then, countries with high trade dependence like Korea will be at a disadvantage. The smaller the domestic economy, the more disadvantageous it will be. Since we are in such a situation, we need to take more special countermeasures.

Then, for example, what is the countermeasure to beat tariffs? How can we go beyond tariffs? The more we do, the more we need to specialize in technology. Quality specialization, technology specialization. I would like to emphasize that it is the moment to pursue such a specialized, productive strategy with technology specialized in the technology that can beat any tariff barrier, quality-specific, quality-exceeding that price.

[Anchor]
Isn't the uncertainty of the U.S. presidential election and the slowdown in China? How should I pay attention to this part?

[Kim Kwangseok]
China's economic slowdown is also developing really strongly. We talked about the IMF report earlier. When the IMF forecasted China's economy this time, it made a really interesting expression, but it predicted that the 24-year forecast would be less than 5% for the first time. So, when there is an unusual event in China's economic history, that may happen. For example, it can happen during COVID-19.

In the absence of such an unusual event, however, the Chinese economy is expected to grow for the first time this year, at 4.8 percent, less than 5 percent, and will continue to slow down to 4.5 percent next year. More importantly, did China not announce a massive stimulus package in the second half of this year?

Nevertheless, the fact that the growth rate has been lowered means that the Chinese economy will become structurally low-growth. As such, it is not a trade structure or trade-dependent system in which our economy depends entirely on China, but a country that still maintains growth of 7% and 8% like India, and a country that is emerging as an emerging country. It must be emphasized that it is time to pursue a strategy to diversify the trade structure more actively than ever by pioneering new markets around these countries.

[Anchor]
I see. Let's move on to the semiconductor market issue. If you look at SK Hynix's 3rd quarter performance, both sales and net profit recorded a record high, what does it mean?

[Kim Kwangseok]
Let me clarify this part. So, Samsung Electronics and SK Hynix are showing different aspects, especially in terms of this performance. Maybe two years ago, this semiconductor market was divided like this. Memory semiconductors and non-memory semiconductors were divided into this. Now, we shouldn't divide the semiconductor market like this. It is rather advantageous to divide it into semiconductors in the AI sector and semiconductors in the non-AI sector.

Because winter has not come to the semiconductor market. The semiconductor market in the AI sector does not come winter. It's spring and summer. Semiconductors in the AI sector continue to be spring days. However, winter has come in the semiconductor market in the rest of the sectors and non-AI sectors except for the AI sector. But I'm sorry, but it's not something we can't do in the semiconductor field of Samsung Electronics.

Non-memory, so it's not the AI semiconductor sector I mentioned earlier. Samsung Electronics is doing well in the non-AI sector. But SK Hynix is doing well in the AI sector. So they are doing well in their respective areas, but there is a difference in the areas they chose. You got it.

So what I want to tell you is that SK Hynix is in the AI sector called HBM, so if I give you a brief explanation, we use AI. Then, AI semiconductors are essential to operate AI and provide AI services. In addition, in order for AI semiconductors to be driven, memory semiconductors for AI and HBM high-bandwidth memory semiconductors are needed, especially for Nvidia, and SK Hynix exclusively supplies the high-bandwidth memory semiconductors, almost absolute proportion.

That is why SK Hynix is improving its performance to match Nvidia's continuous improvement. Samsung Electronics is still moving to supply Nvidia, but it is still trying to do so, but it has not produced any significant results so far, so it is showing a different performance in terms of performance.

[Anchor]
You explained the different contrast between Samsung Electronics and SK Hynix clearly, but didn't the stock price clearly differ? In the case of Samsung Electronics, many people are curious about how long this will continue because it is the largest stock among large stock markets, and foreign selling is so strong.

[Kim Kwangseok]
That's right. Foreign investors also saw through those things. After all, it is AI semiconductors that foreign investors are also very interested in. Then, when it comes to AI semiconductors, what you are most interested in is big tech companies that provide AI services. And Nvidia, which offers AI semiconductors. And SK Hynix, which supplies HBM memory semiconductors necessary for AI semiconductors to be driven. Many foreigners are investing in these companies.

Then, I would like to suggest that you are taking out money in other areas. Then, when will Samsung Electronics show a different appearance? If I give you that opinion again, Samsung Electronics' recent apology from the decision maker means that it will take another leap forward. The leap forward is an expression of its willingness to successfully test and deliver the next model of HBM to Nvidia.

That's how determined it is to reach a technical level so that it can be tested by Nvidia. I'm hoping that it will produce some results so that it can be delivered to Nvidia at the end of the second half of 24. If it is delayed a little, I think Nvidia HBM delivery performance will be a medicine at the beginning of the first half of 25.

This is because from Nvidia's point of view, it's not a good way to rely entirely on any one or two companies to receive HBM. I'm drawing that picture to maintain my bargaining power, so if I give you an opinion, when such an earnings announcement comes out, for example, a sign that it's likely to be delivered to Nvidia, or that it's passed a test to deliver, foreign funds will be concentrated on Samsung Electronics. I would like to suggest that this will be the momentum of Samsung Electronics' stock price.

[Anchor]
I see. Let's move on to the next issue. After the Bank of Korea's decision to cut the benchmark interest rate, the banking sector lowered the receiving rate all at once, but did not lower the loan rate. How do you rate this situation?

[Kim Kwangseok]
First of all, I think it's an area where viewers can sigh again. You must be already burdened by high prices and already struggling with high interest rates. However, the savings interest rate that you had saved falls again, but if you are a variable interest rate dependent, the loan interest rate goes up further? Does this make sense? So the bank is the difference in the loan-to-deposit rate, what is this? This is the profit. a gap in interest rates on a deposit basis

Then, does the bank, called the gap between deposit and lending rates, take more profits? I think you will be able to have a sad, sighing feeling that only banks are better in a really difficult economic situation. Once I give you an opinion, I will give you an opinion that the bank may tend to lower the receiving and saving interest rates in terms of the bank's management strategy in the process of lowering interest rates.

However, there is another meeting once a week to express the willingness of the Financial Services Commission not to increase household loans systematically from a financial policy point of view, and the Ministry of Strategy and Finance or the Korean government not to explode the size of household debt further. So maybe you have to raise the interest rate on household loans to prevent household debt from increasing.

So it can be seen that these things also work. Therefore, it is also necessary to consider some aspects that are used as a device to prevent the size of household loans from increasing more explosively by not lowering the interest rate on household loans in policy.

Of course, I don't want you to understand it because of that, but because of the policy move to catch some household loans, this loan interest rate does not go down quickly. I think it will help you understand this phenomenon.

[Anchor]
Then, lastly, how long do you think the financial authorities' stance that raised the threshold for loans will continue?

[Kim Kwangseok]
Basically, until 2025, the Bank of Korea has cut interest rates once. But it doesn't end with this one-time rate cut. To give you my opinion, the peak of Korea's benchmark interest rate was 3.5%. I cut it once. My view is that we will gradually and slowly cut interest rates by about 2026, going from 2.0 to 2.5%.

So, I would like to suggest that the loan interest rate may not fall temporarily, but in the mid- to long-term, the loan interest rate will slowly stabilize downward.

[Anchor]
I see. Let's stop here. So far, I have been with Kim Kwang-seok, an adjunct professor at Hanyang University. Thank you.