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Foreign media say Yoon's misstep proved the problem with Korean economy

Published: 10 Dec. 2024, 16:20 Updated: 10 Dec. 2024, 16:56

A New York Times article covering economic issues in Korea. [SCREEN CAPTURE]

Global coverage of the Korean economic situation has been scathing, with international news reporting that the crisis over the impeachment of President Yoon Suk Yeol could deliver a critical blow.

Outlets have pointed to a year headlined by slow economic growth, weak financial conditions and the looming threat of U.S. tariffs under the incoming Donald Trump administration, all made worse by Yoon's ill-fated martial law declaration.

The New York Times said on Friday that Korea’s economy has been facing grim prospects throughout the year even in the absence of the political turmoil.

“The country’s stock market is one of the worst-performing in the world this year, its currency has weakened more against the U.S. dollar than other major Asian currencies and the economy has largely stagnated," the paper said.

“In the immediate aftermath of the martial law decree, South Korean stocks and the country’s currency plunged, before recovering somewhat after a quick reversal by Mr. Yoon.”

Several outlets have said that Yoon has proven the idea of the “Korean discount,” in which a mountain of perceived vulnerabilities in the economy causes domestic stocks to be undervalued globally.

Reuters reported that risk premiums will likely increase, serving as “a reminder of the reasons Korean stocks and the currency have underperformed [in] global markets for months.”

Al Jazeera reported that the martial law decree that “rattled” Korea’s economy had the ultimate effect of wrecking President Yoon’s pledge to rescue the stock market from this negative perception.

Longer-term issues, such as increasing trade competitiveness with Taiwan and a demand slowdown in China, are already taking their toll.

“While the fallout has been relatively contained so far, a protracted standoff would be the worst outcome for South Korea’s financial markets and the broader economy, analysts say,” the Doha-based outlet reported.

Protesters holding banners and light sticks call for President Yoon Suk Yeol's impeachment and arrest in front of the National Assembly in Seoul on Dec. 9, 2024. [YONHAP]

The immediate consequences of the martial law declaration have forced the Yoon administration to pledge “unlimited support” to stabilize the markets, at a time when the Democratic Party is using its majority in the National Assembly to cut next year's budget.

This has caused a standoff between parliament and Finance Minister Choi Sang-mok, with a stall in legislation made worse by Yoon’s total loss of political capital.

Business Insider went as far as to report predictions that the Korean economy would “boom” upon the president's impeachment or replacement in a by-election, according to research firm GlobalData TS Lombard.

"A relatively quick political resolution would enable an emergency budget. More expansive fiscal spending in conjunction with another 50 basis points of policy rate cuts in [the first half of 2025] nudges up our GDP forecast to 2.1 percent.”

Conversely, TS Lombard predicted GDP would continue to plummet if a presidential election was dragged into 2025.

Forbes contributor William Pesek remarked that Yoon's entire legacy may amount to little more than the economic consequences of the martial law declaration.

“Had Yoon put the last 941 days to good use to increase competitiveness and level playing fields, South Korea might be in a better position to deal with China’s downshift and U.S. President-elect Trump’s imminent trade war," he remarked.

BY KAYA SELBY [[email protected]]