Refusal to comply with investigation and arrest… Korean civil war still ongoing
Stock and exchange rate anxiety… Bad news for exports and domestic demand
Potential risks of Trump’s return and US-China trade conflict
A foreign media analysis said that the political crisis in Korea is holding back the economy. The diagnosis is that the remnants of President Yoon Seok-yeol’s December 3 civil war have not been fully resolved and are having a negative impact on the economy, including the stock market and exchange rate.
On the 6th (local time), the German media outlet Deutsche Welle (DW) reported under the title ‘Korea’s political crisis is dragging down the economy’ that President Yoon did not cooperate with the investigation against him and did not comply with his arrest, casting a cloud of uncertainty over Korea. It was reported that this was hanging. It was assessed that problems arising from the power struggle at the top are leading to stock market instability, a decline in the value of the won, and the exodus of foreign investors.
Former lawmaker Kim Sang-woo, a board member of the Kim Dae-jung Peace Center and former member of the 15th National Assembly as part of the National Assembly for New Politics, said, “A lot of the political unrest we have experienced over the past month has not yet been resolved. “The won has already weakened against the dollar, but it has worsened further due to political instability, and it is worrisome that it is unclear who currently governs the country,” he said. “This is very unsettling for companies that are afraid to make plans for next year.”
According to a survey by the Bank of Korea last month (December of last year), business sentiment across all industries fell to the lowest level in four years. The monthly comprehensive business sentiment index fell 4.5 points compared to the previous month, hitting the lowest level since September 2020, when the impact of the COVID-19 pandemic began in earnest. Economic growth was forecast to fall below 2% in 2025 due to weak export growth and declining consumer spending, and is expected to fall further as global trade tensions worsen.
The stock market also reacts immediately to political situations such as impeachment or arrest. The won continues its downward trend against the dollar and is trading at a level close to its lowest level in 16 years since the global financial crisis.
In addition, foreign investors sold more than 17 trillion won in Korean government bonds by the 30th of last month after President Yoon declared martial law on December 3, suggesting that confidence in the country’s financial stability is declining. Poor corporate performance is also becoming a negative factor, and the government announced last week that tax revenues from January to November 2024 decreased by 8.5 trillion won compared to the previous year.
In addition, with the return of US President Donald Trump, who called Korea a ‘money machine’, increases in the contribution of US troops stationed in Korea and tariff increases are also potential negative factors. Due to the intensifying trade conflict between the U.S. and China and the U.S. policy to exclude China from its supply chain, Korean companies may have to bear a greater burden.
Mason Rich, a professor at Hankuk University of Foreign Studies, said, “There is great uncertainty about the actions the incoming U.S. administration will take on tariffs and the pressure it will put on Korea to renegotiate the Korea-U.S. Free Trade Agreement (FTA),” adding, “The actions he will take toward China will affect Korean electric vehicle battery manufacturers, etc. “It will have a serious impact,” he analyzed.
[서울=뉴시스]
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