Political Crisis Deepens in Korea: Acting President Dismissed; KOSPI Tumbles
Investing.com -- The political crisis in Korea deepened today as the parliament ousted the acting president Han Duck-soo. This development came just two weeks after President Yoon Suk Yeol was removed from office following an unexpected declaration of martial law. This situation could potentially impact the country's economy and financial markets.
Han's dismissal today stemmed from his rejection of three new judicial appointments to the Constitutional Court. The court, normally composed of nine members, requires at least six judges to approve Yoon's ousting. With only six judges currently on the bench, a single dissenting vote could have saved Yoon. This marks the first time in Korean history that an acting president has been removed from office.
Finance Minister Choi Sang-mok became the acting president while continuing his duties as finance minister. Choi stated he is determined to "minimize turmoil in state affairs," but he did not clarify whether he would maintain Han's stance on the judicial appointments.
Capital Economist analysts suggest that if Choi does not bend to the opposition's demands, he could also be ousted, potentially prolonging the political crisis in Korea. The quickest resolution would be for Choi to appoint new judges; this would likely lead to the Constitutional Court endorsing Yoon's dismissal and subsequently trigger a presidential election within 60 days.
The People Power Party (PPP) is currently unpopular, and the opposition Democratic Party (DP) could see Lee Jae-myung become president. Lee narrowly lost to Yoon in the 2022 presidential election. The more left-leaning DP could reverse Yoon's plans to reduce the size of government and may also favor more conciliatory relations with North Korea and China.
Signs of the crisis affecting the economy are already visible. Consumer confidence saw its largest drop since the onset of the COVID-19 pandemic in December; the Bank of Korea's composite consumer confidence index fell by 12.3 points to 88.4 on December 23. A reading below 100 typically signals contraction.
The December PMI and trade data, set to be released early next month, will reveal whether this turmoil has impacted the industrial sector.
The crisis unfolds amidst an already struggling economy; GDP growth was just 0.1% in the third quarter and is expected to grow only 2.0% this year. Political polarization and the resulting uncertainty may deter investments in Korea.
Thailand, a politically divided Asian country that experienced a coup and subsequent martial law a decade ago, serves as a cautionary tale; the country has since underperformed.
The Korean currency fell by 0.3% today and the stock market dropped by 1.0%; both have declined by approximately 4% since Yoon declared martial law on December 3.