Laura Alfaro, chief economist at the Inter-American Development Bank, advised South Korea on Tuesday to set aside a portion of revenue from the ongoing semiconductor boom to prepare for future economic downturns, as the government moves forward with a major fiscal reserve plan.
The proposed 162 trillion won ($122 billion) Future Response Fund aims to redirect additional tax revenue generated by the chip sector into long-term investments while building financial buffers to offset potential shortfalls in future years.
Speaking at a press conference at the Four Seasons Hotel Seoul, Alfaro acknowledged she was not privy to the fund’s internal mechanics but praised its guiding philosophy, stating it aligns with standard economic practices for shock preparedness.
“This can help prevent excessive exchange rate appreciation and some of the effects of large, rapid capital inflows,” she said. “The spirit of the fund sounds like what needs to be done.”
She, who also serves as a professor at Harvard Business School, was in Seoul to deliver a keynote address at the G20 Global Financial Stability Conference 2026, co-hosted by the Finance Ministry and the Korea Development Institute.
She emphasized the importance of economic flexibility alongside stabilization funds, noting that resilience during boom-and-bust cycles depends not only on curbing overspending during good times but also on the ability to adapt quickly during downturns.
“The other approach is to maintain flexibility — in labor markets, economic structures and government spending,” Alfaro said. “When boom-and-bust cycles occur, the problem is not just excessive consumption during good times, but also the inability to adjust during downturns.”
Pointing to Korea’s past struggles, including the 1997 Asian financial crisis and prior semiconductor market volatility, Alfaro credited the country’s recovery with structural reforms such as adopting a more flexible exchange rate and strengthening its financial system.
As a Costa Rican national and expert in international economics, she also suggested that Korea could expand ties with Latin America, tapping the region’s varied energy portfolio and mineral wealth to support semiconductor supply chains.
“There are opportunities for us to partner, with trade and knowledge flowing in both directions. There is a great deal of potential for cooperation.”
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