S. Korea’s economic health hinges on political stability

Bank of Korea‘s (BOK) governor said on Thursday the key factor for the health of Asia’s fourth-largest economy in the coming months is the stabilisation of recent political turmoil.

Previously, the main variable was US monetary and trade policy. Now, the biggest factor affecting the economy is the stability of the political process in the coming months,” BOK Governor Rhee Chang-yong told a news conference.

“That is why a normalisation of the political process is way more important than lowering interest rates a month earlier or later,” said Rhee, speaking after the Bank of Korea unexpectedly held policy interest rates steady at 3.00 per cent on Thursday.

President Yoon Suk Yeol’s recent attempt to impose martial law led to a significant political crisis. As a result, the government has revised its 2025 economic growth forecast down to 1.8 per cent from 2.2 per cent.

Rhee explained that the choice to keep rates unchanged was to bolster the weakening won, partly due to political factors. He noted that the political event on Wednesday, likely referring to the arrest of impeached President Yoon, helped support the won.

On Wednesday, the won briefly strengthened following the news of Yoon’s arrest. The currency continued to rise on Thursday, reaching its highest level since January 8 at 1,449.6 per dollar.

Attribution: Reuters

Subediting: Y.Yasser