Yoon Suk-yeol‘s political survival hangs by a thread. On Saturday 14 December the South Korean Parliament will express its opinion on a possible impeachment of the president. Ten days after the attempt to establish martial law that threw the country into crisis, what are the economic consequences of this situation? Decipherment.
South korea, the world’s fourteenth largest economy and eighth largest exporter in the world, weighs heavily. The country competes with its very powerful regional neighbors as Chinese or the Japan. But today its economy is losing momentum,growth is slowing. It is indeed expected to be around 2% this year,far from a growth rate of around 10% in the 1990s thanks to industrial production and then investments in the electronics sector.
This success and the emergence of the South Korean economy were made possible thanks to an interventionist state. several plans have been put in place to ensure that South Korea remains a key player. To name just two,there is the K Semi Conductor Strategy,in 2023,to reposition itself on the market for example semiconductor market creating a national strategy on the topic to catch up with the Taiwanese or Korean New Deal program that aims to stimulate the economy by emphasizing green technology.
Chaebols, essential players
If these strategies are implemented by the authorities, major South Korean groups participate in them. These large conglomerates are called chaebol. Impossible not to mention them. The five largest are Samsung,Hyundai,SK Group,LG and Lotte. Thay accounted for half of South Korea’s GDP in 2022. Furthermore, since the beginning of the crisis, these companies have been as worried as they have been discreet.
Their relationship with the state is intimately close. If they have participated in the economic development of the country, they also represent a risk. Their share of business is such that if one of these giants collapses, the whole of South Korea could be in trouble. Economics is rarely separated from politics and vice versa. The government and the chaebol are in a kind of love-hate, even collaboration-corruption relationship. The former president of the country paid the price in 2022, she was fired and convicted in corruption scandal.
Listen tooSouth Korea,exasperated by the corruption of its “chaebol”
An instability that is worrying
So it’s clear. The current political situation in South Korea is linked to the economic situation. If we put all these elements together, we can clearly see the feverishness of the South Korean system. This institutional and political crisis began with the vote on the budget for 2025. The president wanted to increase spending, which the opposition did not want. Ten days ago he therefore briefly decreed martial law on the pretext that these expenditures were necessary for national, economic, military and political security. Now he’s in the spotlight.
This instability is unlikely to improve the situation in the country. The medium-term impact is starting to raise questions and concerns. In any case, one thing is certain, this does not reassure investors. As South Korea is ultra-dependent on exports, everything is thus based on this global trade context, which implies a certain stability in the country.
What are the potential economic impacts of President Yoon Suk-yeol’s impeachment on South Korea’s export-dependent industries?
An Exclusive Interview on South Korea’s Political and Economic Crisis: Insights from Expert Dr. Min-Jae Kim
Time.news Editor (TNE): Thank you for joining us today, Dr. kim. South Korea is facing a potential impeachment of President Yoon suk-yeol amid a turbulent political climate. How do you see this affecting the economy, particularly given the forecasted growth at around 2% this year?
Dr. Min-Jae Kim (MJK): Thank you for having me. The political instability is indeed troubling. an impeachment process can further shake investor confidence, which is already fragile. Given South Korea’s dependence on exports, particularly in sectors like electronics and semiconductors, any political turmoil can hinder growth. At a mere 2% expected growth, we’re seeing a stark contrast to the booming rates we experienced in the 1990s.
TNE: You mentioned South Korea’s dependency on exports. In your view, how does the relationship between the government and the chaebols—such as Samsung and Hyundai—impact this situation?
MJK: The chaebols are central to South Korea’s economy, contributing significantly to GDP.Their close, albeit complex, relationship with the government shapes much of the economic landscape. If major chaebols face difficulties, the repercussions can be severe—possibly triggering a broader economic downturn. Their role becomes even more critical during times of political instability, as any misstep can lead to a loss of confidence across the board.
TNE: Can you elaborate on the current strategies like the K Semiconductor Strategy and the Korean New Deal? How effective do you think they will be considering the current crisis?
MJK: Both strategies aim to reposition South Korea in the face of intense global competition, especially from Taiwan in the semiconductor realm. However, their success heavily depends on stable governance. The current political crisis creates uncertainty, which can deter investments necessary for these strategies to take off. If the government is perceived as unstable, investors may hesitate to back these initiatives, undermining their effectiveness.
TNE: Considering the recent attempt at martial law by president Yoon, how does this historical precedent affect public perception and investor sentiment?
MJK: The attempt to impose martial law triggered alarms not just domestically but internationally as well. Public perception is crucial here; if citizens feel their rights are being compromised, trust in government can erode. For investors, this raises concerns about governance and the potential for abrupt policy shifts.We’re already seeing hesitancy in investment decisions, particularly in industries reliant on global trade.
TNE: What practical advice would you offer to investors or businesses looking to operate within South Korea during this period of uncertainty?
MJK: it’s essential for investors and businesses to remain agile and informed. Diversification is key—companies should explore ways to mitigate risks associated with heavy dependence on the South Korean market. Additionally, keeping a close watch on political developments and being prepared for rapid changes can provide a competitive edge. It may also be beneficial to engage with local experts to navigate this complex landscape.
TNE: Thank you, Dr. Kim, for your insights. As we’ve discussed, the interconnectedness of politics and economics in South Korea is crucial for anyone interested in understanding its current challenges and opportunities.
MJK: Thank you for having me.I hope this discussion sheds light on the complexities of the situation in South Korea. It’s a pivotal moment that coudl define the future trajectory of its economy.
Conclusion
In navigating the precarious balance of politics and economics, stakeholders in South Korea must meticulously consider their strategies in the face of uncertainty. The coming weeks will be decisive, and the outcomes will ripple through both the domestic and global economic landscapes.