swaps

Jan. 11 (Asia Today) — Asia Today interviewed Sejong University business administration professor Kim Dae-jong on Tuesday about the 2026 economic outlook and strategies for coping with rising foreign exchange risks and fiscal pressures. Below are highlights in a question-and-answer format.

Q: Do you believe there is a real possibility of another foreign exchange crisis like the one in 1997?

A: “South Korea’s current foreign exchange defense capabilities are extremely vulnerable. The country’s foreign exchange reserves relative to GDP stand at around 22%. This is woefully inadequate compared to Taiwan, which holds reserves equivalent to 80% of its GDP. Meanwhile, the Korean won’s share of international payments is a mere 0.1%, making it a currency that no one will accept during a crisis. With an 84% probability of an upward trend in the exchange rate, the won is projected to surge to between 1,550 and 1,600 won per dollar by 2026. Without government preparedness, the likelihood of a foreign exchange crisis approaches 30%. We must significantly increase foreign exchange reserves to Taiwan’s level and establish safety nets through measures like Korea-Japan currency swaps. The interest losses from holding reserves are a cost we must bear given the potential losses from a crisis.”

Q: The government claims its finances are robust. What do the actual indicators show from your perspective?

A: “The government reassures us with a debt ratio of 52%, but this is merely an illusion. Broad national debt, including public enterprise debt and unfunded pension liabilities, has already surpassed 130% of GDP. The 2026 budget proposal shows an 8.1% increase to 728 trillion won ($560 billion), more than four times the inflation rate, pursuing loose expansionary fiscal policy. The IMF classifies countries with non-reserve currencies as risky when their debt ratio exceeds 60%. South Korea is expected to cross this threshold by 2029. Securing fiscal soundness is crucial for national survival.”

Q: What are the fundamental causes and solutions for the youth employment rate being only 45%?

A: “Companies are fleeing overseas to avoid high taxes and regulations. Korea’s corporate tax rate of 26% is higher than the global average of 21% and higher than places like Singapore and Ireland. The United States encourages innovation through negative regulation, but Korea is stifled by positive regulation. Allowing Uber alone could create more than 300,000 jobs, yet we are cutting off the buds of new industries. We need concrete action to create a business-friendly environment. Instead, the government raised the corporate tax rate by 1 percentage point.”

Q: In this situation, how can individuals protect their assets and become wealthy?

A: “I recommend a top-ranked stock strategy: invest 90% of your assets in the top U.S. market cap companies and 10% in the top Korean company. As dollar-denominated assets, they protect wealth when the exchange rate rises. Apartment subscription accounts should never be canceled and should be maintained. Statistically, the net asset threshold for the top 1% of wealthy Koreans is 3 billion won. By building expertise at work and consistently investing 25% of your salary into top-tier stocks, you can join that group.”

Interviewer: Kim Lee-seok, Editorial Advisor

Compiled by: Lee Jung-ho, Staff Reporter

— Reported by Asia Today; translated by UPI

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