Political Uncertainties Increase Downside Risks to Economic Growth: Foreign IBs | Be Korea-savvy

Political Uncertainties Increase Downside Risks to Economic Growth: Foreign IBs


Choi Soon-sil, the woman at the center of South Korea's political scandal, is surrounded by reporters as she enters the Seoul Central District Prosecutors' Office for questioning on Oct. 31, 2016. (image: Yonhap)

Choi Soon-sil, the woman at the center of South Korea’s political scandal, is surrounded by reporters as she enters the Seoul Central District Prosecutors’ Office for questioning on Oct. 31, 2016. (image: Yonhap)

SEOUL, Nov. 2 (Korea Bizwire) – South Korea’s political uncertainties over an unfolding influence-peddling scandal could increase downside risks to the country’s economic growth, a report said Wednesday. 

Citigroup said the scandal involving President Park Geun-hye’s longtime confidante could shrink consumer sentiment, which in turn could further slow the economic growth rate in the fourth quarter, according to the report released by the Korea Center for International Finance. 

In the July-September period, South Korea’s gross domestic product increased 0.7 percent from the previous quarter, decelerating from a 0.8 percent on-quarter expansion three months earlier, according to preliminary data from the Bank of Korea.

Citigroup also said the political uncertainties could have limited influences on the country’s financial markets, noting major political issues in the past, including the 2004 impeachment of then liberal President Roh Moo-hyun, had no significant impact on the financial markets. 

British investment bank Barclays said South Korea could place its policy priority on stabilizing the markets for the time being due to political uncertainties. 

On Wednesday, Park nominated Kim Byong-joon — who served as policy advisor to late President Roh — as new prime minister in a Cabinet shakeup meant to allay mounting public anger over the influence-peddling scandal. 

Foreign investment banks also said South Korea’s production activities could be affected by Samsung Electronics Co.’s discontinuation of Galaxy Note 7 smartphone as well as restructuring of the shipping and shipbuilding industries and downside pressure in the service sector. 

Samsung Electronics halted production of the flagship Note 7 smartphone last month after some of the devices caught fire. Samsung’s IT and mobile division accounted for 8.6 percent of South Korea’s exports last year, according to data of Korea International Trade Association.

(Yonhap)

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