Seoul: The political uncertainty triggered by President Yoon Suk Yeol's brief imposition of martial law last month has persisted for weeks, sparking concerns over South Korea's sovereign credit rating. On Sunday, Yoon's legal team announced that the impeached president would not attend the first hearing of his impeachment trial, citing personal safety and security concerns.
According to Yonhap News Agency, Yoon's decision is linked to a notable standoff on January 3 between investigators led by the Corruption Investigation Office for High-ranking Officials and the Presidential Security Service, concerning the execution of his detention warrant. This move is interpreted as Yoon's attempt to delay the legal proceedings scheduled by the Constitutional Court, which plans five hearing sessions until February 4.
The ongoing refusal by Yoon to cooperate with investigations has intensified the political turmoil, which threatens South Korea's international image. The situation is particularly alarming due to the unstable leadership under acting President Choi Sang-mok, affecting the nation's economic stability.
Choi, serving as acting president since December 27, 2024, after former Prime Minister Han Duck-soo was impeached, has been actively engaging with senior officials from major credit rating agencies like Standard and Poor's, Moody's, and Fitch. These agencies have signaled potential economic challenges if the political crisis continues, according to the Finance Ministry.
This concern marks a shift from the agencies' earlier confidence in South Korea's economic resilience. Meetings held on December 12 saw the agencies expressing faith in the nation's institutional strength and credit stability, despite political difficulties. However, the ongoing crisis, especially the controversy over Yoon's detention warrant, has fostered doubts about the country's political and economic stability.
Choi has reassured the agencies that the nation's constitutional and legal systems are now functioning correctly, with financial and foreign exchange markets recovering. He emphasized the coordinated efforts of the Bank of Korea, Finance Ministry, and Financial Services Commission to ensure market stability.
He also highlighted the government's commitment to implementing key economic policies and managing legislative agendas through a new consultative body with the National Assembly. Choi, recognized for his competence as both deputy prime minister for economic affairs and finance minister, aims to minimize the economic impact of the political turmoil.
Despite Choi's assurances, the warning from credit rating agencies about prolonged political instability must be heeded, especially concerning foreign investment and corporate decisions. Although the agencies currently view the political impact as limited, they caution that a downgrade in South Korea's sovereign credit rating is possible, given the ongoing political turbulence.
A downgrade in the sovereign credit rating, a critical indicator of economic stability, could severely impact South Korea's economy. It could lead to increased interest rates on government bonds, higher borrowing costs for the government and businesses, and a series of economic shocks.
To prevent such an economic crisis, South Korea needs to swiftly resolve its political turmoil and implement policies to restore investor confidence both domestically and internationally.