Finance minister convenes contingency plans to contain impeachment-driven risks

Finance Minister Choi Sang-mok delivers a speech as he presided over an emergency meeting of economy-related ministers at the Government Complex Seoul, Sunday. Yonhap

Finance Minister Choi Sang-mok has begun implementing contingency plans to contain risks deriving from the impeachment of President Yoon Suk Yeol, Saturday.

Economists and market observers believe that the impeachment has helped ease some of Korea's economic uncertainties, especially in comparison to the aftermath of the National Assembly's previous failed impeachment attempt on Dec. 7.

At that time, uncertainties rattled the stock exchange, the currency market and other parts of the country's economy as Yoon retains his position despite being politically constrained.

While Yoon's presidential powers have been suspended, economic risks are feared to persist as the impeachment will need to be finalized by the Constitutional Court, a process potentially taking up to six months.

“I assure you that Korea will successfully cope with the recent political turmoil and that its economy and financial markets will remain stable,” Choi said while presiding over a meeting of economy-related ministers at the Government Complex Seoul, Sunday.

He implicitly referred to lingering economic concerns, such a weakening Korean currency that has since Dec. 7 remained in the 1,430 level against the U.S. dollar — which is well below the psychological threshold of 1,400.

The volatility in the foreign exchange market is in contrast to the benchmark KOSPI. On Dec. 9, it plummeted to 2,360.58 points — the lowest level in more than a year — but managed to bounce back and is now in the pre-Dec. 7 range of 2,400.

Three global rating agencies — Moody's Ratings, Fitch Ratings and Standard & Poor's Global Ratings (S&P) — deemed that Korea's credit rating remains stable despite the political turmoil. However, such views can possibly change over the next six months depending on political and economic developments.

"Under the circumstances, I ask for all stakeholders to bolster efforts for the country's economy to go on in a sustainable manner," Choi said.

The meeting was the first of three emergency gatherings led by Choi on the day, following the orders of Prime Minister Han Duck-soo, who has assumed office as acting president.

The second meeting had a broader range of participants, including trade and foreign ministers. Choi, who also doubles as the deputy prime minister, was given the right to preside over the gathering as he is now interim second-in-command of the Cabinet after Han.

The third meeting included four top officials overseeing fiscal, monetary and regulatory policies, including Bank of Korea (BOK) Governor Rhee Chang-yong, Financial Services Commission (FSC) Chairman Kim Byoung-hwan and Financial Supervisory Service (FSS) Governor Lee Bok-hyun.

All three meetings are scheduled to take place every day for the time being.

In a separate economic assessment, Sunday, the BOK reckoned that “heightened volatility in financial and foreign exchange markets has been easing.”

“With the recent passage of the impeachment motion in the National Assembly improving the predictability of the political process, market volatility is expected to decline further,” it noted.

The central bank, however, warned that the economy can be adversely affected if the political conflict surrounding Yoon's impeachment takes longer than the impeachment cases of two of his predecessors — Roh Moo-hyun in 2004 and Park Geun-hye in 2016. The court took 91 days to review the impeachment of Park and 63 days for Roh.

“Should the duration of political conflict prolong beyond the previous cases amid forthcoming political developments, the economic impact may expand," it said.

Meanwhile, major business lobby groups urged the government and National Assembly to “minimize chaos concerning state affairs” in the wake of Yoon’s impeachment.

They included the Korea Chamber of Commerce and Industry (KCCI), which called on them to “pay special attention and make relevant efforts to swiftly stabilize political circumstances.”

The Korea Federation of SMEs proposed a joint emergency meeting of the bipartisan parties and the government to address economic issues. A similar proposal was also made by Rep. Lee Jae-myung, leader of the main opposition Democratic Party of Korea.