Seoul allays concerns about economy

South Koreans carrying placards reading 'Park Geun-Hye Out' during a rally against the President on Gwanghwamun Square in Seoul on Dec 10, 2016.
South Koreans carrying placards reading 'Park Geun-Hye Out' during a rally against the President on Gwanghwamun Square in Seoul on Dec 10, 2016. PHOTO: EPA

Key ministers say govt doing all it can to keep nation stable amid uncertainty after impeachment vote against Park

South Korea has sought to assuage concerns over the economy and political uncertainty following President Park Geun Hye's impeachment vote, with two key ministers pledging that the government is doing all it can to stabilise Asia's fourth-largest economy amid headwinds.

Finance Minister Yoo Il Ho, addressing foreign media yesterday, acknowledged that the country faces numerous uncertainties domestically and globally, but he will work closely with relevant ministries to "successfully navigate through these tough times" and keep the economy "strong and stable".

The move came as prosecutors indicted former presidential aide Cho Won Dong and former vice-culture minister Kim Chong as part of their investigations into a corruption and influence-peddling scandal involving Ms Park and her good friend Choi Soon Sil.

Kim was indicted on charges of abuse of power and coercion, while Cho was charged with colluding with Ms Park to try to pressure a South Korean conglomerate, CJ Group, to dismiss a group vice- chairman. The cases will be heard in court from this week.

South Korea is bracing itself for the impact of weakened leadership, after legislators voted 234-56 last Friday to impeach Ms Park. Her powers have been suspended while the Constitutional Court reviews the case, and Prime Minister Hwang Kyo Ahn has taken over her duties.

Analysts voiced concern that key decisions would have to be delayed because Mr Hwang, as Acting President, is only a caretaker who lacks political support to call the shots.

 
 
 
 

But government spokesman Cho Yoon Sun, in a statement to foreign correspondents, emphasised that Mr Hwang is "overseeing state affairs meticulously to ensure that the Republic of Korea maintains a strong national security, seamless foreign policy and stable financial and foreign exchange markets".

Ms Cho, who is also Culture Minister, said that "maintaining a watertight defence posture" against North Korea is a top priority, and the Finance Ministry is "doing all it can to maintain the international community's confidence in the (South) Korean economy".

Financial market indicators such as stock prices and exchange rates are being kept stable probably because of these efforts, she added.

Finance Minister Yoo said his ministry is studying the impact of Ms Park's impeachment vote and will soon reveal a revised growth forecast for next year, which is expected to be lower than the current 3 per cent.

The export-driven economy grew less than 1 per cent in the last three quarters, with key industries like shipping and manufacturing hit by poor performance and labour strikes. With consumption expected to shrink amid the political crisis, the Korea Development Institute, a state-run think-tank, predicted zero growth for the last quarter.

Moody's Analytics, in its latest review, said signs of inflation pressures are building up. Even though the economy is benefiting from an upswing in the global tech cycle, "the gains will be limited as political scandals rock the country and key export sectors struggle with disruptions to production", it said.

Dr Hyunju Kang, research fellow at think-tank Korea Capital Market Institute, said the financial authorities should be wary of the growing household debt and possible capital outflows next year.

 
A version of this article appeared in the print edition of The Straits Times on December 12, 2016, with the headline 'Seoul allays concerns about economy'. Print Edition | Subscribe