The Bank of Korea suggested that current external conditions are less favorable than during the impeachments of former presidents Roh Moo-hyun and Park Geun-hye, advising that economic policies such as the execution of a supplementary budget should be promptly implemented.
On the 15th, the Bank of Korea released a press note outlining future economic countermeasures based on economic trends following the passage of impeachment motions against former presidents Roh Moo-hyun and Park Geun-hye in March 2004 and December 2016.
According to the Bank of Korea, past impeachment phases increased volatility in financial markets but had limited impact on the economy. Stock prices quickly recovered to previous levels after the National Assembly's approval of impeachment motions, and while exchange rate volatility increased around the approval, movements were largely influenced by global dollar trends.
The impact on the real economy was also not significant. Private consumption temporarily slowed around the quarter when the impeachment motion was approved due to a decline in consumer sentiment but continued to either ease or improve subsequently. Investment was more influenced by the construction sector and the global semiconductor market than by the political situation, and customs exports were only slightly affected by domestic political uncertainty.
The Bank of Korea assessed that, in both current and past impeachment cases, political uncertainty increased volatility in financial and foreign exchange markets, but indicators such as government bond yields, credit spreads, and credit default swap (CDS) premiums remained relatively stable throughout the impeachment phases.
The Bank of Korea explained, "During past impeachment phases, economic policies were executed separately from the political process, maintaining confidence that the economic system was functioning normally, allowing the impact to be managed at a tolerable level." The bank also noted regarding the current impeachment phase, "It is likely that the economic system can be separated from the political process as it is primarily triggered by political factors."
However, external conditions are viewed as having worsened compared to the past. During previous impeachment phases, favorable external conditions such as China's high growth in 2004 and a booming semiconductor market in 2016 supported growth through improved exports. This time, increased uncertainty in the trade environment and intensified global competition in key industries have compounded external difficulties.
The Bank of Korea stated, "If these external factors overlap with domestic factors, it could amplify the economic impact, so a more proactive response to the economic situation than in the last two cases is needed through bipartisan agreements."
Specifically, it mentioned the need to quickly showcase that our economic system operates normally by agreeing on and executing major economic policies such as the supplementary budget through bipartisan cooperation. It also emphasized the importance of continuing structural reform efforts such as capital market advancement and strengthening industrial competitiveness.