South Korea Appoints Shin Hyun-song as New Central Bank Governor Amid Economic Uncertainty

On March 22, 2023, South Korean economist Shin Hyun-song was nominated by President Lee Jae-myung to lead the Bank of Korea (BOK) as its new governor, succeeding Rhee Chang-yong, whose term concludes on April 20. Shin, who has served as the head of the Monetary and Economic Department at the Bank for International Settlements (BIS), is stepping into this role during a period marked by economic pressures, including inflation driven by the ongoing conflict in Iran and uneven domestic growth.

South Korea names BIS veteran as new central bank governorNikkei Asian Review

Shin faces significant challenges as he prepares to navigate the complexities of South Korea's economy, which is experiencing rising inflation alongside stagnant growth in traditional sectors such as steel and petrochemicals. His appointment comes at a time when the BOK has maintained its benchmark interest rate at 2.50%, with indications that rates may remain steady until at least August 2023. In his statements, Shin emphasized the need for a "balanced" monetary policy that considers inflation, growth, and financial stability, particularly in light of the volatility in financial markets and the uncertain economic outlook stemming from the Middle East situation.

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Born in Daegu in 1959, Shin holds a doctoral degree in economics from the University of Oxford and has previously taught at Princeton University. He is recognized for his expertise in banking, international finance, and monetary economics, and has been a vocal advocate against excessive borrowing, warning of the risks associated with high household debt. His academic and professional background positions him as a potentially hawkish figure, likely to prioritize financial stability over growth.

South Korea names BIS veteran as new central bank governor

In a briefing, a spokesperson for President Lee noted that Shin's experience and academic reputation make him well-suited to address the current economic challenges. Shin himself remarked on the importance of considering the duration of the Iran conflict and its impact on oil prices when formulating monetary policy. He stated, "If it's a supply shock, and certainly if it's a temporary one, these are the textbook examples where you should look through and not react with monetary policy."

South Korea names BIS veteran as new central bank governor

Despite broad support for his nomination, some economists express concern about the potential for a hawkish stance that could prioritize inflation control at the expense of growth. Seok Byoung-hoon, an economics professor at Ewha Womans University, highlighted the risk of simultaneous inflation and economic slowdown, suggesting that the BOK may need to focus on controlling inflation regardless of the new governor's approach.

South Korea names BIS veteran as new central bank governor

Shin's confirmation hearing in the National Assembly is pending, although lawmakers do not have veto power over the president's nomination. If confirmed, he will chair the BOK's monetary policy meetings and influence decisions that could shape the economic landscape of South Korea until 2030.

South Korea names BIS veteran as new central bank governor

• “Volatility in financial and foreign exchange markets, as well as uncertainty over the economic outlook, heightened recently on rapid changes in the Middle East situation,” — Shin Hyun-song, Incoming BOK Governor

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• “He is likely to strengthen the macro prudential framework and focus more on household debt/FX stability, a clear shift from growth-inflation focused monetary policy,” — Park Jeong-woo, Economist at Nomura

South Korea names BIS veteran as new central bank governor

• “Given his background at the BIS, and Korea’s macro conditions, I believe he is more likely to incline towards hawkish stance.” — Anonymous Economic Analyst

South Korea names BIS veteran as new central bank governor