Editorials
The government’s defense of Korea’s economic fundamentals sidesteps criticism that policy missteps and weak accountability helped drive the stock market’s extreme volatility.
The government has rushed to rebut a series of foreign media reports and columns criticizing the extreme volatility of Korea’s stock market and the policy confusion that helped fuel it. But its response has largely missed the point. Instead of addressing criticism over flawed policymaking, officials have chosen to highlight the country’s economic fundamentals, deflecting attention from the policy failures at the heart of the controversy.
Earlier, Bloomberg published a commentary arguing that Korea is becoming “uninvestable.” The article pointed to extraordinary market volatility: The benchmark stock index had plunged roughly 40 percent in just 27 trading sessions, severely damaging investor confidence. It also identified policy missteps as major contributors, such as the introduction of single-stock leveraged exchange-traded funds and the unexplained expansion of the National Pension Service’s allocation to domestic equities, both of which amplified market swings.
In response, Deputy Prime Minister and Finance Minister Koo Yun-cheol said on Thursday that “the Korean economy is stronger than ever and delivering unprecedented achievements.” He added that the government has moved swiftly to contain market volatility and that stock indexes have recently shown signs of stabilization.
His remarks echoed an earlier statement from the Financial Services Commission, which emphasized the “solid fundamentals” of the economy and insisted that there was “absolutely no risk” of the country being viewed as uninvestable.
Many investors would likely find such assurances detached from reality. On Thursday alone, shares of Samsung Electronics fell 6.3 percent, and those of SK hynix plunged 10.37 percent, triggering another trading curb, known locally as a sidecar, on the Kospi. It marked the 46th sidecar activation this year. Is this what the finance minister considers a stabilizing market?
The insistence on emphasizing economic fundamentals while financial markets deteriorate is also reminiscent of the argument made three decades ago, before the 1997 financial crisis, that Korea’s economic fundamentals remained sound despite mounting warning signs. History has shown that healthy macroeconomic indicators cannot compensate for misguided policies or restore shattered market confidence.
Meanwhile, the economic team led by presidential chief of staff for policy Kim Yong-beom faces allegations that it introduced high-risk financial products without conducting proper stress tests to assess potential vulnerabilities. Calls are growing for a transparent investigation and accountability. The presidential senior secretary for public relations, however, sidestepped the issue on Thursday, saying only that “the priority now is to focus on countermeasures.”
Such evasive responses will only deepen public distrust in the government’s policymaking capacity. After a devastating fire, no one would accept officials who focused solely on rebuilding while refusing to explain how the blaze started. Financial markets demand the same principle: Containing the damage is essential, but identifying the cause and holding those responsible accountable are equally indispensable.