"The Three Highs Are Not a Sign of Crisis, but the Cost of Success" — Kim Yong-beom's Economic Assessment

Kim Yong-beom, Chief Presidential Secretary for Policy at The Blue House, said that high interest rates, inflation, and exchange rates are the "cost of success" that inevitably accompanies South Korea's economy as it moves to a new level. He added that they are "not a sign of crisis, but the friction of a leap forward."
He said the economy's overall pricing structure is being readjusted as improved performance in semiconductors and artificial intelligence, stronger exports, and gains in the stock market come together. Kim also stressed that authorities must respond in advance to concentration and volatility in key variables such as exchange rates and interest rates.
In a Facebook post on the 24th titled "The Cost of Success," Kim said, "Views of the South Korean economy these days are confusing," adding, "Corporate earnings are hitting record highs and exports are overflowing, but interest rates are rising, exchange rates are unstable, and home prices are picking up again."
He noted that seemingly contradictory developments are unfolding at the same time, leaving markets and public opinion busy searching for signs of crisis. Still, he pointed out that the source of the confusion lies not in the economy itself, but in the framework through which it is being viewed.
Kim said South Korea's economy is entering a phase this year in which nominal growth is nearing 10 percent. He explained that surging corporate earnings in semiconductors and artificial intelligence are improving the terms of trade and lifting export prices, creating a cycle in which corporate profits, wages, and asset prices all rise together.
He said, "As household income rises, tax revenue expands, and the national debt ratio naturally declines, a virtuous cycle is taking hold." He added that "an upward adjustment in the economy's overall pricing structure is not, in itself, a negative development."
On the exchange rate, he drew a line between the current won weakness and the kind of dollar shortage-driven depreciation seen during the Asian financial crisis. Kim explained that KOSPI has surged more than 70 percent this year, doubling the value of foreign investors' holdings of domestic stocks from 1,300 trillion won at the end of last year to 2,600 trillion won recently. He said that as investors partially realize those huge valuation gains, foreign selling has exceeded 110 trillion won so far this year, an unprecedented level, and the resulting demand for foreign exchange has pushed up the won. He described it as a paradox created by success, not a weakness in the South Korean economy.
Even so, he emphasized, "This does not mean we will stand by and do nothing about the rise in the exchange rate." He added, "We will actively manage excessive concentration and volatility."
Regarding inflation, he said rising oil prices caused by the Arab-Israeli conflict are increasing cost pressures across energy, food, and logistics.
He said this calls for an extraordinary response that mobilizes all available policy tools, including measures to stabilize energy prices, reform unfair market structures, provide vouchers for vulnerable groups, and flexibly adjust stockpiled supplies.
He identified the real estate market as the area requiring the most decisive action.
Kim said pressure for higher home prices is building again as rising nominal growth, synchronized asset markets, and a sharp drop in new move-in supply converge.
In particular, he warned that if capital flows into high-priced real estate, the new phase of growth that South Korea's economy has entered could itself be destabilized. He stressed that structural demand-management measures to curb speculative demand and block capital from flowing into property must be carried out alongside supply policies. He added that the government must move faster and more forcefully than the market.
cjk@fnnews.com Choi Jong-geun Reporter