The South Korean central bank announced on Monday ( Jan 20 ) that its 2025 growth forecast had been slashed as a result of the political crisis brought on by President Yoon Suk Yeol’s declaration of martial law last month.
On December 3, Yoon recently suspended civilian rule, sending soldiers to congress, but lawmakers rejected the measure and eventually removed the president, who is currently being held in custody for a criminal investigation on rebellion costs.
He primarily resisted arrest and has since declined to cooperate with investigators. When his incarceration was extended, his devoted followers attacked a judge developing on Sunday.
The Bank of Korea said in a statement that” the sudden declaration of martial law in early December, coupled with the ongoing political turmoil and the Jeju Air passenger plane crisis, significantly dampened financial sentiment.”
A Jeju Air Boeing 737-800 crashed on Dec 29 in southern Muan airport, killing 179 individuals in the worst-ever aircraft crisis on South Asian land.
The lender said the social unrest and fall “produced contractions in private intake and construction investment, which is likely to cause the fourth-quarter growth rate to fall significantly below the November projection.”
” Consumption, which had shown progress in the second quarter, appeared to diminish again in the third third”, it said.
As a result, the company’s Monetary Policy Committee revised down its forecast for the last third of 2024, from 2.2 per cent to a range of 2.0 to 2.1 per cent.
It had projected 1.9 per cent growth for 2025, but” the projection has been revised downward to 1.6 to 1.7 per cent”, it said.
According to the statement,” This adjustment is largely attributable to the political uncertainty that the declaration of martial law in December has weakened economic sentiment.”
This is thought to have reduced the growth rate for this year by about 0.2 %, with particular impact on domestic consumption and other areas of domestic demand, it continued.