Biden’s inauguration D3 Bidenomics positive expectations for exports and growth in Korea

The burden of continuing US-China conflict and strengthening environmental regulations
US dollar outlook for’releasing money’… Stock market expectations are strong

Banking Team = US President-elect Joe Biden’s economic policy,’Bidenomics’, is expected to act as an opportunity factor for the Korean economy in all directions and affect the Korean economy in all directions.

In particular, there is high hope that the biden government’s large-scale economic stimulus measures, easing protection trade, and multilateral revival policies will have a positive impact on the export-led Korean economy.

Immediately, uncertainties in the economy and trade caused by Trumpnomics have been greatly reduced.

However, the fact that the trade conflict between the US and China is expected to continue even after the inauguration of the Biden government, and that corporate and environmental regulations are expected to be strengthened is a risk factor, so it is pointed out that preparation is necessary.

In the Biden era, the dollar is expected to weaken in the medium term due to the US’money release’, and it is predicted that it will play a positive role in the domestic stock market due to overflowing liquidity.

◇ Decreased trade uncertainty, positive for Korea’s export and growth rate… Conflict between the US and China is burdensome
There are many analyzes that the new trade environment, which will emerge with the inauguration of the Biden government, will positively affect the export and growth rate of Korea.

The Biden administration is expected to break away from the US-centered protectionism and bilateral negotiation strategy promoted by the former President Donald Trump’s administration, to restore relations with allies, and to transition to a multilateral system.

This can lead to an improvement in the global trade economy as global trade volume increases if the uncertainty that unexpected variables will occur in the international trade order decrease.

Previously, the Hyundai Research Institute said in a report on’Characteristics and Implications of Bidnomics’, “If Bidnomics is promoted, the Korean economy will be positively affected by the expansion of the US economy and the increase in the amount of trade resulting from the recovery of the world trade order.” It predicted that 0.6 to 2.2 percentage points and the economic growth rate could increase by 0.1 to 0.4 percentage points.”

If protection trade is eased and large-scale economic stimulus measures promoted by Biden-elect and the Democratic Party are implemented, the US economy is expected to normalize and exports to the US are expected to increase.

On the 14th (local time) five days before his inauguration, Biden-elect opened the first chapter of’Bidnomics’ by announcing an economic stimulus plan worth $1.9 trillion (about 2,000 trillion won).

However, even after the inauguration of the Biden government, it is pointed out that it is necessary to pay attention to the’US-China conflict’ as it is not expected to withdraw the stance of public control.

If trade friction between the US and China, Korea’s two largest exporters, continues, the economic recovery and economic growth could be hit.

The Bank of Korea also predicted in a recent report that “the biden government is highly likely to cause the US-China conflict”.

Reinforcement of environmental regulations related to exports is also considered a risk factor.

There are concerns that the Biden administration’s strong will to regulate the environment will become a new trade barrier for Korean companies.

Biden-elect and the Democratic Party have argued that countries that do not comply with the climate agreement during the presidential election should be penalized such as a carbon adjustment tax and an income quota.

It is pointed out that corporate tax increases and anti-trust laws that the Biden government will promote will also be a burden on Korean companies.

Professor Kim So-young of the Department of Economics at Seoul National University said, “Since a large-scale economic stimulus plan is expected after the inauguration of the Biden government, it will have a positive impact on the growth rate of not only the US economy but also the Korean economy. Is expected.

In particular, exports related to China may experience difficulties.”

Young-moo Cho, a research fellow at the LG Economic Research Institute, said, “The increase in fiscal expenditure by the US government is positive for the Korean economy, but antitrust regulations on large information technology (IT) companies and strengthening government intervention in enterprises are negative.

◇ Weak dollar keynote and stock market positive flow outlook on overflowing dollar liquidity
Under the Biden administration, the dollar is expected to weaken in the medium term, given the US fiscal deficit, additional stimulus measures, and the global economic recovery.

Biden’s economic stimulus measures have increased the burden of the fiscal deficit, fueling the weakening of the dollar.

In addition, as the preference for risky assets increases in the financial and foreign exchange markets, the value of currencies in Asia and emerging countries, including the renminbi, is expected to show strong strength.

Accordingly, there are many views that the won will remain strong against the dollar for some time.

As the won/dollar exchange rate decline is a factor that weakens the price competitiveness of domestic export companies, it is pointed out that export companies need to prepare for management strategies in consideration of this.

It is expected that US monetary policy will continue to ease for the time being.

This is because the US low interest rate policy to cope with the global economic contraction is expected to be prolonged due to Corona 19.

Sung Tae-yoon, professor of economics at Yonsei University, said, “The only thing to consider is the case that the US economic recovery is faster than ours.

If the real economy in the US recovers quickly after Biden took office, we will have to adjust interest rates. “As soon as the US Federal Reserve (Fed) raises interest rates due to inflationary pressure due to the economic recovery, Korea’s finance may be shocked. “I said.

In general, the analysis that the weakening pressure of the dollar in the Biden era is positive for domestic and Asian stocks.

When the dollar weakens, US money flows into emerging countries, and Asia, which has an attractive valuation, will be particularly noticeable.

First of all, in the first half of this year, it is expected that the domestic stock market will take a positive trend due to the anticipation of the economic stimulus and overflowing liquidity.

Park Sang-hyun, a researcher at Hi Investment & Securities, said, “There are areas where the biden effect is reflected in the stock market, but there are areas where the policy can be materialized after taking office.” It will have an impact,” he predicted.

The inauguration of the Biden government is expected to improve export conditions in the future, which could be a boon to the domestic stock market.

In addition, the market predicts that the growth of the eco-friendly industry in the US opens up opportunities for growth in the battery and new and renewable energy businesses, creating a favorable environment for related industries.

If the Biden government fulfills its presidential election pledge to release $2 trillion in clean energy and climate change response infrastructure over four years, it is expected that eco-friendly energy industries such as wind power and solar power and electric vehicle battery industries will benefit.

However, as the economic recovery becomes visible, the possibility that the Fed will begin to normalize its monetary policy early could be a burden on the stock market.

How the Biden government’s policy toward China will become visible is a factor that will affect the domestic stock market.

Researcher Park said, “If we continue to go into conflict structure, it will have a (negative) effect on our stock market.”

/yunhap news