South Korea’s economy faces growing uncertainty following President Yoon Suk Yeol’s brief martial law declaration and the subsequent ongoing impeachment efforts, leading to increased market volatility.
The finance ministry’s latest report warns that while inflation remains under control, domestic and global risks could dampen economic sentiment.
Amid this, opposition lawmakers passed a drastically reduced 2024 budget of 471.5 billion U.S. dollars, cutting funds for key government operations, including the presidential office and national security.
This budget squeeze raises concerns about the government’s ability to manage state affairs in the coming year.
For a deeper discussion on this, we’re joined by Yang Jun-sok, Professor of Economics at the Catholic University of Korea.
Also joining us from Chicago is Greg Buchak, Professor of Finance at Stanford Graduate School of Business. Great to have you with us.
(Greg)1. Let’s start with Professor Buchak, amid rising concerns over the political situation in Korea, how do you assess the immediate economic impact of the recent martial law and political crisis?
(Yang) 2. How about you Professor Yang? Jo Dong-chul, the President of the Korea Development Institute (KDI), stated on December 11th that the negative impact of martial law and the impeachment crisis on the economy is “limited and will not last long.” Would you agree?
(Greg) 3. Professor Buchak, How much do you think the latest political turmoil could impact foreign companies and investors?
(Yang) 4. Meanwhile, Professor Yang, the domestic stock market has been fluctuating following President Yoon’s public address on Thursday, after showing slight signs of recovery. How do you forecast the future direction of the stock market?
(Greg) 5. Lately, South Korea’s currency has shown some volatility as it depreciated sharply against the dollar. It’s still showing signs of uncertainty, Professor Buchak how do you gauge the impact of the political situation to have affected exchanges?
(Greg) 6. There are concerns about whether this high exchange rate will persist for a longer period of time.
What are your forecasts? And what potential repercussions should we prepare for?
(Yang) 7. The nation’s foreign exchange authorities have hinted that they would intervene to lower exchange rate volatility and take strong action. Professor Yang, What measures could they take? And what’s the foreseen impact?
(Yang) 8. The National Assembly recently passed a revised national budget that cuts 4.1 trillion won -roughly 2.9 billion dollars -from the government’s initial proposal. How do you think these cuts -especially to the reserve fund and special activity expenses -will affect South Korea’s economic stability in the short term and long term?
(Yang) 9. The opposition party has stated that if necessary, additional funds can be allocated through supplementary budgets. However, there has been controversy over the government’s fiscal soundness. How do you view the government’s financial capacity in this regard?
(Greg) 10. Professor Buchak With rising concerns about how the international community might react to South Korea’s political turmoil, what do you expect the impact of this situation will be on South Korea’s trade relations, especially with major partners like the U.S. and China?
(Greg) 11. What kind of policy measures do you think the South Korean government should adopt to stabilize the economy in the short term and regain public and investor confidence, given the political situation?
source : https://www.arirang.com/news/view?id=278991
