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Economic policy proceeds after removal of Park

Finance Ministry says ruling has no impact on financial stability
Mar 13,2017
The government said it will proceed with the economic policies that were made under Park Geun-hye’s administration and that it will try its best to run the country stably until the new administration takes office.

Government officials met Saturday morning, a day after the Constitutional Court ruled to oust Park, and said the ruling had no direct impact on the economy, but it will monitor the situation closely, the Ministry of Strategy and Finance said.

“Korea’s financial market seems to remain stable even after the ruling and there were no significant changes to preliminary data on economic factors such as consumption, investments and exports,” said Joo Hwan-wook, a director at the Finance Ministry. “Global ratings agencies also said they are not making changes to Korea’s credit ratings, saying that the ruling finally erased the political uncertainty in the country. Domestic economies continue to be weak and there are rising uncertainties such as the possible interest rate hike in the United States so we will run a special task force to monitor financial markets 24 hours every day to respond if something happens.”

The government said it will also execute the budget as early as possible to boost domestic consumption and investment in the country.

In fact, Fitch Ratings said Friday, “Political uncertainty appears to have held back economic activity for some time now. The Constitutional Court’s decision to uphold Parliament’s impeachment of President Park paves the way for elections within 60 days and implies that an end to a lengthy period of political uncertainty in Korea may be in sight.”

Fitch added it doesn’t expect political disruption to severely affect economic activity in the medium term.

Some analysts were more pessimistic.

“We do agree that one political uncertainty was removed after the ruling, but there still are many other political uncertainties remaining in the country,” said Moon Jung-hwa, an analyst at KB Financial Group. “The problem is that Korea has to elect a new president in a very short period of time and there are questions whether voters can find what candidates plan to do within 60 days. Consumer sentiment is likely to improve but it is unclear whether it will lead to boost actual domestic consumption in the country.”

Another analyst said the ruling will have a positive impact on the economy.

“The ruling is likely to increase the possibility of opposition parties’ candidates, who are more pro-China, to become a new president,” said Kim Yong-ku, an analyst at Hana Financial Group. “This might help cosmetics and food-related companies that were hit by the Chinese government’s decision to retaliate against Korea’s decision to deploy the U.S. antimissile system here in the country.”

Yim Jong-yong, chairman of Financial Services Commission, also met with key financial players to discuss the possible risks Sunday.


BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]