Economic woes deepen amid leadership void in Korea

입력2025.01.09. 오전 12:00
수정2025.01.09. 오전 12:01
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Korea ushers in the new year with a bleak economic outlook as the twin shocks of martial law and impeachment exacerbate a domestic consumption slump. Signs of a prolonged economic chill abound. The Korea Development Institute issued a sobering warning for the first time in two years, stating that "downside risks to the economy are growing." This assessment stems from sluggish production growth, a delayed economic recovery and waning consumer confidence amid heightened uncertainty.

Frozen consumer sentiment is at the core of this analysis. During the 2016 impeachment of President Park Geun-hye, the consumer sentiment index fell by 9.4 points over three months. This time, the index has plummeted by 12.3 points in just one month, underscoring the severity of the current crisis.

International observers are equally concerned. Global investment banks have downgraded their growth forecasts for Korea. JP Morgan recently slashed its 2025 growth projection to 1.3 percent, a steep 0.4 percentage point reduction within a month. The average forecast by eight major global investment banks now stands at 1.7 percent, down 0.4 percentage points in three months and below Seoul's own estimate of 1.8 percent. Political uncertainty at home is a key driver of these grim predictions.

Korea’s corporate sector is also grappling with significant headwinds. Key export industries face mounting challenges, and Samsung Electronics, the crown jewel of the nation’s economy, reported a stark earnings shock for the fourth quarter. According to the company's report on Wednesday, Samsung’s operating profit plummeted to 6.5 trillion won ($4.45 billion), falling short of market expectations and even underperforming its troubled third quarter. A combination of China’s aggressive pricing strategies and delays in high bandwidth memory (HBM) supply have taken a toll. Nvidia CEO Jensen Huang's criticism of Samsung’s HBM design further clouds the company’s outlook. Adding to these woes, the upcoming inauguration of U.S. President-elect Donald Trump on Jan. 20 introduces additional uncertainties for businesses.

The crux of the problem lies in a glaring leadership vacuum as Korea navigates this economic storm. Acting President Choi Sang-mok, who must spearhead the nation’s economic recovery, remains entangled in political controversies. Opposition parties have accused Choi of dereliction of duty for not invoking his authority over the Presidential Security Service, with impeachment threats casting a shadow over his leadership.

Political leadership, meanwhile, offers little hope. Mired in partisan strife, lawmakers have sidelined economic and livelihood issues. The opposition has continued to push restrictive corporate regulations, such as amendments to the National Assembly Testimony and Appraisal Act, while stalling critical legislation like the Semiconductor Special Act, which is essential for supporting the industry's activity.

Democratic Party leader Lee Jae-myung hosted a foreign exchange market roundtable Wednesday, but without genuine bipartisan cooperation, such gestures risk dismissal as mere political theater. Korea’s economy needs action rooted in sincerity, not superficial displays of concern.

To weather this storm, decisive leadership and unity are essential. The path to recovery demands prioritizing the economy over political disputes and embracing collaborative governance to restore public and investor confidence. Korea’s economic resilience hinges on it.


Translated using generative AI and edited by Korea JoongAng Daily staff.

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