Lee Jae-myung's economic playbook: big spending, bigger control

Korea Herald

21 hours ago

Pro-spending aides take key economic posts as President Lee moves to centralize budget planning under presidential office
President Lee Jae-myung has assembled a pro-spending economic team to spearhead his early policy agenda, while leaving the key post of finance minister vacant — a move widely seen as a strategic effort to weaken the Ministry of Economy and Finance and shift fiscal authority toward the presidential office to accelerate policymaking.
The appointments of Kim Yong-beom as chief of staff for policy, Ha Joon-kyung as senior presidential secretary for economic growth, and Ryu Deok-hyun as presidential advisor for fiscal planning underscore this shift. All three support an expansionary fiscal policy, in line with Lee's vision of using public spending to drive structural reform and revive domestic demand.
Lee has notably elevated the role of fiscal planning within the presidential office. Ryu's newly created post was upgraded from a low-level secretarial role under the Moon Jae-in administration to vice-ministerial rank. Coupled with the sidelining of the Finance Ministry in key appointments, the move signals the administration's intent to centralize control over economic policymaking.
The presidential office described Ryu as someone who will "strengthen democratic oversight of fiscal policy" by restoring discipline within the ministry and mobilizing resources to fulfill Lee's campaign pledges. A professor at Chung-Ang University and former official at Korea's top public finance institutions, Ryu is known for his expertise in budgeting and fiscal reform.
Ha's appointment also breaks with precedent. The role of senior economic secretary — traditionally held by finance ministry officials — now goes to the Hanyang University economics professor and former Bank of Korea economist. A longtime policy ally of Lee, Ha is considered a key architect of the president's economic agenda. His title was revised to include 'growth,' underscoring the administration's focus on recovery and long-term restructuring.
Overseeing both is Kim Yong-beom, a seasoned economic policymaker who previously served as first vice finance minister, vice chair of the Financial Services Commission and senior economist at the World Bank. The presidential office highlighted his leadership during Korea's COVID-19 response, noting his role in crafting and implementing measures credited with swiftly stabilizing the economy during the crisis.
Kim has outlined a vision for what he calls 'structurally transformative fiscal policy' — redirecting Korea's accumulated wealth into active circulation to spur consumption, employment and productivity. 'What we need now isn't just stimulus or tax cuts, but a structural shift in the economy,' he wrote in a recent social media post.
This philosophy underpins the administration's first major economic initiative: a supplementary budget exceeding 20 trillion won ($14.7 billion). Framed as a recovery package for struggling households amid high inflation and weak demand, the funds are expected to be delivered mainly through government vouchers and other cash-based support.
Experts caution that Lee's expansionary fiscal approach may offer only a temporary boost unless paired with reforms that address the root causes of Korea's weak domestic demand.
Kim Jung-sik, emeritus professor of economics at Yonsei University, warned that the proposed supplementary budget could provide only a short-term lift. 'If most of the funds are channeled into local currency handouts, consumption may tick up in the short term, but there's a strong chance the government will be forced to repeat the exercise next year,' he said. 'The focus of fiscal policy should be not simply on disbursement, but on strategic allocation.'
While fiscal expansion may be necessary, Kim stressed it must go hand in hand with structural reform to ensure long-term stability. 'The downturn is rooted in structural weaknesses,' he said. 'Treating only the symptoms — such as small business distress — without revamping institutional structures or Korea's industrial base will result in ballooning debt and mounting fiscal inflation.'
In contrast, Myongji University professor Woo Suk-jin emphasized the importance of short-term recovery measures such as the supplementary budget, given Korea's grim outlook.
'When the economy is clearly deteriorating, the government's role becomes critical,' the economist said. 'Rather than intervening across the board, it must draw clear boundaries. Stimulus is an urgent task that must be addressed directly, but it should be paired with support from institutions equipped to guide long-term growth.'
Woo also noted that fiscal expansion must be matched by efforts to bolster revenue. 'Eventually, the state will need to raise revenue — not by hiking tax rates, but by broadening the tax base through structural reforms,' he said.
He also supported curbing the Finance Ministry's power, calling such a move 'in line with the principle of checks and balances.' 'The mega-ministry model may have once been efficient, but it no longer fits the current moment. What's needed now is a clear and transparent assessment of the fiscal landscape,' he said.
Woo added that operational strength, and alignment with the president's new economic team, should be central to selecting the next finance minister. 'It's a misconception that only career finance officials can run the ministry,' he said. 'If the ministry is to be broken up, a capable technocrat — or even a politician — could be a viable choice.'
The finance minister post has remained vacant since Choi Sang-mok stepped down on May 1. While the ministry has long dominated Korea's economic policymaking, Lee is seeking to carve out its budgeting function and bring it under presidential control, potentially positioning Ryu, as fiscal planning advisor, to take the lead.