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(News Focus) Impeachment removes uncertainty, but may hurt economic growth in long run: analysts

All Headlines 16:32 December 09, 2016

By Byun Duk-kun

SEOUL, Dec. 9 (Yonhap) -- The impeachment of South Korean President Park Geun-hye is expected to undermine the country's long-term growth, but for now, the vote to impeach the president may help remove uncertainties at least for the stock market, local analysts said Friday.

"The vote has removed political uncertainties. A failure to pass the impeachment motion would have had a more serious implication as it would have extended the period of uncertainties," said Hyundai Securities analyst Bae Sung-young.

The remarks came after the National Assembly voted to oust the president for her alleged involvement in corruption and influence-peddling scandals surrounding her longtime friend Choi Soon-sil.

Prime Minister Hwang Kyo-ahn (R) and Finance Minister Yoo Il-ho (Yonhap file photo)

The 300-seat unicameral parliament voted 234 to 56 for the impeachment of President Park, with seven nullified and two abstained, in the second attempt in the country's history to oust an incumbent president. The last such case took place in 2004 when then-President Roh Moo-hyun was voted out of his seat, but was later reinstated by a Constitutional Court ruling.

This photo, taken on Dec. 8, 2016, shows lawmakers from the splinter People's Party holding or displaying signs at the National Assembly demanding the impeachment of President Park Geun-hye. (Yonhap)

The court will again review Park's case, which could take up to six months, according to legal experts.

"The impeachment itself will not lead to an immediate economic recovery, as local consumption has been dragging for some time with no signs of recovery in sight despite a series of government stimulus measures," Bae said. "Local economic conditions will likely depend on additional stimulus measures under the next administration."

Exports, one of two major pillars of growth for Asia's fourth-largest economy, will unlikely be affected by the outcome of Friday's vote, the analyst noted.

"External conditions, such as exports, have been moving along with external factors, such as the election of Donald Trump, possible U.S. rate hikes and movements in global oil prices," he said.

(News Focus) Impeachment removes uncertainty, but may hurt economic growth in long run: analysts - 3

Ko Seung-hee, a Mirae Asset Daewoo researcher, agreed the impeachment of Park will only have short-term effects.

"The impeachment may affect some companies that are already facing problems, but it will have no real effect on the fundamentals of most firms," Ko said.

"The stock market too may experience some fluctuations in the short run, but in the end its direction will depend more on economic fundamentals such as the success of ongoing corporate restructuring," he added.

Others insisted the impeachment will have no direct impact on the economy, saying a rejection of the motion would have resulted in a catastrophic outcome.

"I doubt there will be any meaningful economic fallout, though a rejection of the impeachment motion would have had long-term negative effects on the local economy," said Hankook Investment & Securities analyst Kim Dae-jun.

The file photo, taken on Dec. 4, 2016, shows the latest protest rally held in Seoul, South Korea, in which an estimated 1.5 million people gathered to demand the resignation of President Park Geun-hye. (Yonhap)

Similarly, the Korea Development Institute (KDI) earlier noted the political uncertainties may have had an adverse impact on the whole economy should they have lasted any longer.

"If the political chaos continues for a while, economic players will reduce consumption and investment, giving adverse impact to the production and labor market," the state-run think tank said.

The KDI has also slashed its growth outlook for 2017 to 2.4 percent from 2.7 percent six months earlier, mostly citing a continued downturn in global trade and a drop in domestic demand caused by what it called a "gradual drop in real income."

Kim Sung-hwan, an analyst at Bookook Securities, said the political unrest, despite its immense impact on the local community, had no little or no implications for the economy.

(AP-Yonhap file photo)

"The political uncertainty had been briefly blamed for the recent slump in the tech-heavy KOSDAQ market, but there is no clear link between the political scandal and economic fundamentals," Kim said.

"To foreigners, uncertainties stemming from the local political community may appear to be as risky as those caused by North Korea, but the actual impact from such risks on the market is limited and short-lived," he added.

Kim also pointed out that the local stock market did better than most others in newly emerging countries that had been hit hard by Trump's election as the next U.S. president, as well as increased volatility in the foreign exchange market.

"In that sense, I believe it will be more correct to say the domestic condition had little or no effect on the local stock market or economy," he said.


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