Impeachment uncertainty shakes markets: What’s next for Korea’s economy?

Welcome to Within The Frame, where we bring the most pressing issues across the globe into focus, I'm Kim Mok-yeon.

As South Korea's political landscape remains mired in uncertainty following the December 3rd martial law crisis and the prolonged impeachment proceedings against President Yoon Suk Yeol, concerns are mounting over the potential economic fallout.

From a volatile Korean won-U.S. dollar exchange rate and rising credit default swap premiums to downward revisions in GDP growth forecasts and rising food prices, the ripple effects are being felt across financial markets and consumer sectors alike.

So, what exactly is driving the economic instability? How will the impeachment verdict impact the markets?

For answers to this, we invite Yang Jun-sok, Professor of Economics at the Catholic University of Korea. Welcome.

Also joining us online is Park Min-jung, Professor of Business Administration at Kumoh National Institute of Technology. Great to have you.

(YANG) 1. Let's start with Prof. Yang. So the political turmoil triggered by the December 3rd martial law emergency has lasted for over three months, intensifying economic instability.

Notably, the won-dollar exchange rate has surpassed the 1,470 mark again after more than 50 days AND maintained such a level for the second day.

What are the reasons for this increase?

(PARK) 2. Now the exchange rate is expected to fluctuate further depending on the impeachment verdict of President Yoon Suk Yeol, which is set for Friday.

There is speculation that, along with the ripple effects of Trump's tariff imposition, the rate could break the 1,500 won mark. Professor Park, what is your outlook on this?

(YANG) 3. Amid the prolonged impeachment situation, concerns are rising about a possible downgrade of the national credit rating.

It is reported that the Credit Default Swap premium, which reflects national external credibility, is rebounding. Prof. Yang, what is the current situation? How could increasing credit risk impact the Korean economy?

(PARK) 4. Alongside the rise in CDS premiums, overseas institutions are successively lowering their economic growth forecasts for Korea this year.

Some even predict that the growth rate could fall to the 0% range. Prof. Park, what are the possible countermeasures to overcome declining economic growth?

(YANG) 5. Shifting gears, the food and restaurant industries are continuously raising prices. This contrasts sharply with the same period last year when price hikes among food companies were rare. Prof. Yang, what are the reasons behind the rising food prices?

(PARK) 6. As for the cause, some criticize that the political vacuum in Korea may have pushed companies to accelerate price hikes. What are your thoughts on this, Prof. Park?

(YANG) 7. There are also analyses suggesting that the recent wildfires in the southeast may affect consumer prices to some extent.

What is your take on this, Prof. Yang? What is the outlook for food price trends going forward?

(PARK) 8. There are concerns that the inflation rates for processed food and dining-out prices may soon exceed 3%. What countermeasures are needed for effective inflation control, Prof. Park?

(YANG) 9. Now, as part of efforts to ease the burden on the public, the government officially announced a supplementary budget of about 10 trillion won.

This is the first time the budget authorities have formally declared such a move. What led to this decision, Prof. Yang? Also, why is it being called an "essential" supplementary budget?