A failed coup, the president and his replacement dismissed: South Korea is experiencing political chaos which has caused its currency to plunge, undermines the confidence of its businesses and threatens to permanently weaken its economy, the fourth largest in Asia.
The won, which fell on Friday to its lowest level since 2009 against the dollar, has been in almost constant decline since President Yoon Suk-yeol’s coup in early December. According to figures published the same day by the Bank of Korea, business and consumer confidence experienced their biggest declines in December since the start of the Covid-19 pandemic.
All this while the upcoming return of US President-elect Donald Trump to the White House and his promises to launch all-out trade wars are causing concern in Seoul.
On the night of December 3 to 4, Yoon Suk-yeol stunned South Korea by imposing martial law and sending the army to the National Assembly to muzzle it, before backing down under pressure from deputies and thousands of pro-democracy demonstrators.
Constitutional Court
Parliament, dominated by the opposition, removed Yoon Suk-yeol on December 14, then acting President Han Duck-soo, leaving Choi Sang-mok, finance minister, in charge.
The constitutional court, with three vacant seats, must rule on the validity of Yoon Suk-yeol’s dismissal. If the positions are not filled, the six remaining justices will have to vote unanimously to confirm the impeachment. Han Duck-soo refused to ratify the appointments of the new judges, leading to his own dismissal.
“Although we once again face unexpected challenges, we are confident that our robust and resilient economic system will ensure rapid stabilization,” Choi Sang-mok tried to reassure on Friday.
Economy in difficulty
This 61-year-old career civil servant now wears three hats: interim president, interim prime minister and minister of economy and finance.
“The easiest way out of this crisis would be for Choi Sang-mok to appoint the new judges”, which would pave the way for a rapid confirmation of Yoon Suk-yeol’s departure and an early presidential election, believes Gareth Leather, from Capital Economics, in an analytical note.
“There are already signs that the crisis is having an impact on the economy,” he continues, citing the decline in consumer and business confidence. “In the longer term, political polarization and the resulting uncertainty could slow down investments in Korea,” adds Gareth Leather.
Resistance of democracy
But most economists also point out that the South Korean economy has so far resisted the chaos. The activity continues as if nothing had happened and all anti or pro-Yoon demonstrations take place peacefully.
As of December 4, the central bank promised to inject sufficient liquidity to stabilize the markets. The Kospi index of the Seoul Stock Exchange has limited its losses to 3.8% since December 3.
ats/miro
