Asia Minute: South Korea’s Economy and Markets Muddling through Political Scandal

Dec 12, 2016

Credit Republic of Korea / Flickr

Political scandal is still dominating the news in South Korea. The president’s powers have been suspended and her future remains uncertain. The parliament is in transition and to the surprise of some, financial markets remain relatively calm. HPR’s Bill Dorman has more in today’s Asia Minute.

South Korea started the week with the Prime Minister as acting president.  The ruling political party is split between those who remain loyal to President Park Geun Hye, and those who joined in voting for her impeachment last week on allegations of influence peddling.

The president herself is now awaiting trial before the country’s constitutional court…accused of 18 breaches of the constitution.  The 9 member court has six months to decide whether the charges should lead to her removal from office.

The political world may be in tatters, but investors are less focused on scandal and more fixated on the Bank of Korea’s next decision on interest rates.  South Korea’s main stock index has actually gained more than 2% in the past month and is up more than 4% over the last year.  That’s a better annual performance than Japan’s main index and along the lines of the main stock indices of Hong Kong and Singapore.

South Korea’s economy is still sluggish….growing at its slowest pace in more than a year in the third quarter.  Household debt is high, consumer confidence low.  One positive sign for the relationship between politics and the economy: budget stability.

In the midst of the latest political drama a week and a half ago, the National Assembly came together to approve next year’s spending bill.