Yoon's impeachment boon for Korean economy

Hundreds of thousands of people gather to rally demanding the impeachment of President Yoon Suk Yeol, near the National Assembly in Yeouido, Seoul, Saturday. Yonhap

The Korean economy is expected to experience a significant rebound due to reduced political uncertainties, following the National Assembly's passage of a motion, Saturday, to impeach President Yoon Suk Yeol for his brief martial law declaration, according to government officials and market watchers.

Yoon’s botched martial law decree on Dec. 3 sent shockwaves across the financial markets, dealing a severe blow to the Korean won and local stocks.

With Asia's fourth-largest economy grappling with the fallout from the unprecedented political saga, Yoon's impeachment is expected to boost investor sentiment in the financial markets and help the economy recover.

“If political uncertainties persist for a long period of time, Korea's sovereign credit rating will face downward pressure,” the Korea Institute for Industrial Economics & Trade said in a report submitted to Rep. Kim Hyun-jung of the main opposition Democratic Party of Korea.

It said the financial markets have experienced extended volatility, marked by sharp fluctuations in stocks and a sharply strengthening U.S. dollar, as uncertainties surrounding Yoon's impeachment heightened jitters among investors.

The won stood at around 1,400 per dollar before Yoon declared martial law. However, it has since weakened to 1,436 won, reflecting investors' preference for safe-haven assets during the period of political turmoil.

The benchmark KOSPI also plummeted for four consecutive trading days from Dec. 4, as investors dumped local stocks. But it has since bounced back to levels seen before martial law declaration, driven by hopes that the impeachment of Yoon will alleviate political risks.

According to data from the Korea Exchange, the KOSPI closed at 2,494.46 points, Friday, inching closer to 2,500.1 points on Dec. 3.

High-ranking financial authorities also echoed a similar view that Yoon's impeachment will bode well for the economy.

“The impeachment of the president is good for our economy,” Financial Supervisory Service Governor Lee Bok-hyun said in a recent media interview. “My view is that the eradication of political uncertainties is crucial for the economy.”

Other data from December 2016, when former President Park Geun-hye was impeached, showed a similar pattern, indicating that the impeachment will help reduce fear and uncertainties surrounding the economy.

The KOSPI closed at 1,963.36 on Dec. 3, 2016, when opposition parties first brought forward an impeachment motion against Park. However, the index surged to 2,024.69 on Dec. 9, when the National Assembly voted in favor of impeaching her.

The main bourse displayed solid gains later and reached 2,097.35 on Mar. 10, 2017 when she was expelled.