April 26, 2024

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[THE INVESTOR] The Constitutional Court’s verdict to oust President Park Geun-hye cleared political uncertainty for the Korean economy, but external risks such as trade issues with the US still remain great challenges, experts said.

“It is good news for the Korean economy that the uncertainty has been removed. But due to the vacancy of the presidency, I’m still worried that Korea has limited room to actively deal with the US government’s foreign currency and trade policies,” said Kang In-soo, head of the private think tank Hyundai Economic Research Institute.

He was referring to the possibility of the US Treasury labeling Korea a currency manipulator in its upcoming April report, in which China is likely to be named as such. Blaming a US trade deficit with Korea, the US trade representative also said in early March that it would carry out a “major review” on the bilateral free trade agreement.

“If the US takes issue with trade imbalance, the Korean government should come up with hard evidence to counter their claims, but a longer leadership vacuum makes it really difficult to do so,” Kang said.

Another challenge comes from China, which has leveled up economic pressure against South Korea over the deployment of the US’ Terminal High Altitude Area Defense anti-missile system.  

“While not only Lotte but all other Korean companies are suffering from canceled business meetings and contracts, Korea has little choice but to wait until (US President) Trump and (China President) Xi Jinping come up with a deal over the issue, during their summit possibly in April,” he said.

Sung Tae-yoon, a professor of economics at Yonsei University, said the Seoul government should separate the political issue from the economy and prioritize their economic policies on stabilizing the markets.

Local financial markets showed no severe fluctuations on the news of Park’s ouster. 

The main bourse Kospi slightly fell in the morning trading but immediately recovered on the news and closed at 2,097.35 on Mar. 10, up 0.3 percent from the previous day.

“The market sentiment is expected to improve due to the clearing of the political uncertainty. As the influence-peddling scandal has had limited impact on the stock market so far, the decision to uphold Park’s impeachment did not lead to a surprise surge of Kospi,” said Kim Yong-gu, an analyst at Hana Financial Investment.

Financial authorities were quick to assure investors the Korean market is stable, regardless of the impeachment of the former president.

Yim Jong-ryong, chairman of the Financial Services Commission, said there is a “general assessment that the current financial fundamental is sounder than at any other time,” at an emergency meeting of senior FSC officials. Meanwhile, the local business community -- including the Korea Employers Federation, the Korea International Trade Association and the Federation of Korean Industries -- released their respective statements, urging political, labor and government circles to focus on jump-starting the weak economy and close the national divide.

The FKI, criticized for its coercion of conglomerates to donate funds to two foundations controlled by Choi Soon-sil, a longtime friend of former President Park, said the group will “take this case as an expensive lesson to seek aggressive investment and job creation, despite the challenging circumstances.”

Kim Sang-jo, director of Solidarity for Economic Reform and an economics professor at Hansung University, said the FKI lost its ability to reform itself because the statement did not include an apology for its wrongdoing.

“In their statement release, it should have first apologized to the general public for its role in corporate donations, which were even mentioned in the Constitutional Court’s verdict today, but it didn’t. It missed the right timing to reborn as a think tank. Now, discussing its reform has become absolutely meaningless,” Kim said.

By Kim Yoon-mi/The Korea Herald (yoonmi@heraldcorp.com)