SEOUL, South Korea — The fallout from the short-lived declaration of martial law by President Yoon Suk Yeol has heaped another worry onto South Korea’s economy, which was already teetering from slowing growth and fears about damage to exports from a shift in U.S. trade policy.
Even before the political turmoil, South Korea’s economy was facing grim prospects. The country’s stock market is one of the worst-performing in the world this year, its currency has weakened more against the U.S. dollar than other major Asian currencies and the economy has largely stagnated.
The election of Donald Trump, with his pledge of across-the-board tariffs, has added to the unease for South Korea’s major exporters, which underpin the economy. It is especially unsettling because South Korea now sells more to the United States than China for the first time in more than two decades, a consequence of Washington’s export controls limiting sales of advanced semiconductors and chipmaking equipment to Chinese firms.
Officials at South Korea’s central bank unexpectedly cut interest rates last week, citing “heightened uncertainties surrounding growth and inflation, driven by the new U.S. administration’s policies.”
In the third quarter, the country’s economy grew only 0.1% from the previous three months, after shrinking by 0.2% in the second quarter.
In surveys of public opinion, dissatisfaction over Yoon’s handling of the economy has regularly ranked among the biggest complaints during his increasingly unpopular presidency. On Friday, the head of Yoon’s own party said that he supported the impeachment of the president, in a vote scheduled for Saturday.
In the immediate aftermath of the martial law decree, South Korean stocks and the country’s currency plunged, before recovering somewhat after a quick reversal by Yoon.
In the days since, South Korea’s finance minister, central bank governor and senior regulators have promised “unlimited” support to markets and pledged to hold “emergency” meetings every morning until conditions stabilize. In statements, they have said that investors should not be “overly anxious” and, on Friday, that market conditions were “generally stable.”
The credit ratings agency Standard & Poor’s said the brief imposition of martial law was “very unexpected” for a country with the third-highest level of credit worthiness. It may take a while for investor confidence to return, the agency said, but it did not expect the decline in sentiment to warrant a change in rating in the short term.
This article originally appeared in The New York Times.
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