Sitting first vice minister nominated to ensure policy continuity and execution

Spreading semiconductor-led recovery to domestic demand, jobs seen as key challenge

Architect of '3-4-5 economic leap' strategy now tasked with delivering results

Lee Hyung-il, nominee for deputy prime minister and minister of economy and finance — currently serving as first vice minister of the Ministry of Economy and Finance — arrives at Government Complex Seoul in Jongno-gu on Monday. [Yonhap]
Lee Hyung-il, nominee for deputy prime minister and minister of economy and finance — currently serving as first vice minister of the Ministry of Economy and Finance — arrives at Government Complex Seoul in Jongno-gu on Monday. [Yonhap]

Lee Hyung-il, first vice minister of the Ministry of Economy and Finance, has been named the second economic czar of the Lee Jae Myung administration. A career economic official with deep experience in economic policy and finance, his selection from the sitting vice ministerial post is widely seen as a move prioritizing policy continuity and execution.

With the growth outlook rising to around 3 percent on the back of a semiconductor boom, Lee's immediate tasks include spreading the benefits of that growth to domestic demand and employment, and brokering a compromise on a tax reform package that has exposed divisions between the government and the ruling party.

President Lee Jae Myung nominated Lee Hyung-il on Sunday as deputy prime minister and minister of economy and finance. Rather than turning to an outside figure, the president handed the role to the first vice minister who has been implementing economic policy since the administration took office.

Presidential Chief of Staff Kang Hoon-sik said at a briefing that Lee is "an outstanding policy expert who has held key economic policy positions across the board," adding that he "demonstrated his execution capabilities by leading the introduction of a petroleum price cap in response to the Middle East-driven surge in oil prices." Kang said he expects Lee, as a young economic chief, to "translate record-breaking economic indicators into tangible improvements in people's lives, overcome polarization and achieve stable growth for our economy."

Born in Daegu in 1971, Lee graduated from Seoul National University with a degree in economics and entered public service in 1992 through the 36th administrative examination. He held a series of core economic policy posts — including director of the capital markets division, director of economic analysis, director of comprehensive policy, director general for economic policy and vice minister for policy — before serving as economic policy secretary at the presidential office and as commissioner of Statistics Korea.

Under the Lee Jae Myung administration, he was appointed first vice minister of the Ministry of Strategy and Finance and later took on the same role at the reorganized Ministry of Economy and Finance. Unlike outgoing Deputy Prime Minister Koo Yun-cheol, whose career was built primarily in budget and fiscal affairs, Lee has developed expertise in macroeconomics and financial policy.

His appointment from the sitting vice ministerial post carries the added expectation that he will personally deliver results from policies he helped design. The first test of his ability to manage policy coordination will be the tax reform package, in which he was involved as first vice minister.

The government has proposed raising the basic deduction threshold for the comprehensive real estate tax on owner-occupied single homes from the current 1.2 billion won ($869,000) to 1.4 billion won, while lowering it to 900 million won for non-owner-occupied single homes. The Democratic Party of Korea has called for a review of the differential treatment based on residency status, and discussions on supplementary measures are ongoing. The key sticking points are the gap in tax burdens between owner-occupied and non-owner-occupied homeowners and the scope of recognized exceptions for unavoidable non-residency. Lee must decide whether to revise the government's proposal before submitting it to the National Assembly or to submit the existing plan and allow adjustments through the legislative process.

Over the medium to long term, he must turn the growth strategy he helped design into concrete results. Lee participated in developing the administration's "3-4-5 economic leap" strategy, which targets a potential growth rate of 3 percent, a top-four ranking in global exports and per capita national income of $50,000. The central challenge is identifying new investment and growth drivers to lift the potential growth rate while broadening the base of economic expansion.

The heavy reliance of the current recovery on semiconductors is another problem to address. The Bank of Korea and the Korea Development Institute forecast this year's growth rate at 3.3 percent and 3.2 percent, respectively, but semiconductors and related industries accounted for 1.2 percentage points of the 1.8 percent growth recorded in the first quarter. Last month, overall employment rose by 108,000, yet the number of young workers fell by 191,000. The task is to translate the semiconductor- and export-driven growth into improvements in jobs and income that people can feel in their daily lives.

Striking a balance between growth and macroeconomic stability will also be critical. Lee must calibrate policy to support the recovery while preventing a resurgence of instability in prices, Greater Seoul housing costs and household debt. He also faces the challenge of managing external uncertainties, including the possibility of additional US tariffs, while investing the increased tax revenues from the semiconductor boom in future growth drivers and building a stable revenue base.

In remarks upon his nomination, Lee said, "Our economy has moved beyond recovery and normalization, and now needs new challenges to make a great leap toward an irreplaceable Korea." He added that he would work to "consolidate the growth momentum our economy has built over the past year and three months, create new investment and growth opportunities through three major mega-projects and lay the groundwork for a rebound in potential growth."

He also said he plans to "do his utmost to support people's livelihoods and overcome polarization — using the policy room secured through the semiconductor boom and other gains — so that the warmth of growth can spread evenly to all citizens."

Profile: Born in Daegu in 1971; economics degree from Seoul National University; vice minister for policy at the Ministry of Economy and Finance; commissioner of Statistics Korea; current first vice minister of the Ministry of Economy and Finance.


y2k@heraldcorp.com