A "triple-high" wave of a high exchange rate, high inflation, and high interest rates is now rolling in earnest over the Korean economy. Analysts say the Lee Jae-myung administration's economic team, which has managed risk factors across the broader macroeconomy on the strength of overwhelming semiconductor-led growth, now faces a serious test.
The exchange rate, a measure of the nation's economic strength, has been collapsing helplessly in recent days. On Friday, the won-dollar exchange rate closed at 1,539.1 won, up 9.4 won from the previous trading day, amid massive stock selling by foreign investors. During the session, it surged as high as 1,549.1 won, threatening the 1,550-won line. The KOSPI also triggered a sell-side sidecar that day, closing at 8,160.59, down 5.54% from the previous day. Foreign investors have continued selling for 20 consecutive trading days since the 7th of last month. Treasury bond yields rose across the board, with the three-year yield closing at 3.882%, up 0.024 percentage point from the previous day, jumping to its highest level in two years and seven months.
Experts are warning that a complex macroeconomic crisis could arrive for the first time in four years, since the 2022 Russia-Ukraine war and the Legoland incident. A former deputy prime minister for the economy, who requested anonymity, said, "Growth indicators are good thanks to the semiconductor effect, but as prices and the exchange rate grow unstable, the importance of macroeconomic management is rising again." He added, "This is a time when the role of a macroeconomic control tower encompassing fiscal, monetary, and exchange-rate policy is more important than ever." Treating the recent triple-high phenomenon lightly as merely a "cost of success" could invite a bigger crisis, he said.
A former senior official from the old Ministry of Economy and Finance also stressed, "The economic team must elevate its crisis management level to the highest level."
The top immediate priority is expected to be protecting vulnerable groups. The triple-high pressure is dealing a direct blow to small business owners and ordinary citizens. Some say that even if the government provides a certain level of cash support, it must clarify the target groups and purpose to maximize policy effectiveness. Experts also point out that policy coordination between the government and the Bank of Korea must be further strengthened.
