Division, leadership vacuum weigh on economy

A supporter of President Park Geun-hye holds up her portrait during a rally opposing her impeachment in Seoul, Friday. In a historic ruling, the Constitutional Court formally removed the impeached president from office over a corruption scandal that has plunged the country into political turmoil, worsening an already-serious national divide and leading to calls for sweeping reforms. / AP-Yonhap

By Park Hyong-ki

The confirmation of the impeachment of President Park Geun-hye will have a limited effect on the Korean economy, analysts said Friday.

Hopes are high that the Constitutional Court’s ruling will ease uncertainty and gradually revive consumer and investor confidence.

The impeachment and political scandal, unfortunately, left behind greater division and disparity among the people — between the old and young; conservatives and progressives; and the rich and the poor.

Analysts say that the outlook for economic reform and revival still remains uncertain, given unfavorable internal and external economic conditions.

“We are seeing the division between rich and poor, and young and old widening. Along with external factors, the division will affect the real economy more than the impeachment ruling,” said Kim Doo-un, an economist at Hana Financial Investment.

Externally, the U.S. Federal Reserve will continue its rate hike campaign, and the Trump administration will propose its 2017 fiscal budget.

The U.S. deadline for its federal debt ceiling extension is March 15.

Also, there is the Netherlands general election, which is expected to be swayed by a wave of populism as was the U.S. presidential election.

These negative external factors could weigh more on the economy than the presidential impeachment, the analyst said.

Independent economist Chu Jin-hyung agreed that the division will make it more difficult for economic reform.

“The parliamentary system here already makes it difficult to pass bills. And the division will make it even more difficult as there will likely be more infighting. The economy will not be much different. The impeachment is unlikely to change it for the better in the short run,” Chu said.

Also, the impeachment left behind a leadership vacuum.

“Government policy-making had reached a state of paralysis due to the mounting political uncertainty as the political crisis around Park escalated,” said Rajiv Biswas, an economist at IHS Global Insight.

Analysts say the country needs a new leader immediately.

The next leader will not only have to reduce tension here and gain solid support, but also resolve regional issues with other countries such as the U.S. and China.

“The leadership vacuum following the impeachment has left Korea economically vulnerable,” said Prof. Yun Chang-hyun, an economist at the University of Seoul.

“The next leader will have to sow seeds of unity at home and send a clear message to the U.S. over trade and to China over the Terminal High Altitude Area Defense anti-missile defense battery.”

Yun added that one thing that came out favorably from the impeachment and the special prosecution was that Samsung Group decided to change by having its subsidiaries and affiliates independently manage their businesses without central control.

This comes after Samsung Electronics Vice Chairman Lee Jae-yong was indicted on bribery charges linked to Park and her close associate Choi Soon-sil.

Following the impeachment, Korea has 60 days to elect its new president.

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