Korean Economic Policy Challenges: Adapting to the “New Normal” in a Post Financial Crisis World

After the 2008 global economic crisis, world economic condition has altered and remained in “new normal.” The market demonstrates that the recovery is not balanced by regions. Coordination is demanded with the specter of long-term economic depression on the horizon. However, with different economic and political fortunes at stake, coordination is unlikely. The trend of the world trade is shifting upward in terms of trade interdependence. Korea’s interdependence ratio also has increased due to a concentrated effort to increase its span of regional trade relations. TPP and RCEP represent a large portion of global GDP, population and trade, which suggests their strong influence in world trade. TPP is more far-reaching agreement with higher standards, while RCEP includes more members, but with higher individual trade barriers. Korea’s potential to adapt to the global economic “new normal” faces significant challenges, in and outside its borders. Past strategies for export-led growth are not going to work in the future. If Korea is to resurrect its economy and turn around its potential for future growth, it needs to look at global economic cooperation, restructuring, lowering regulation, promoting a creative economy, and managing its risks. Korea is expected to have economic benefit through TPP and RCEP. And Korea is likely to pursue accession to both agreements of TPP and RCEP in a two-track strategy rather than choosing just one path. By creating a virtuous circle in these policies, Korea can exploit the potential of the new global economic reality and revitalize its health.