SEOUL: South Korea’s central bank said on Monday (Jan 20) it had slashed its 2025 growth forecast because of the political crisis triggered by President Yoon Suk Yeol’s declaration of martial law last month.
Yoon briefly suspended civilian rule on Dec 3, sending soldiers to parliament but lawmakers voted the measure down and later impeached the president, who is now being held for a criminal probe on insurrection charges.
He initially resisted arrest and has refused to cooperate with investigators and, when his detention was extended, his die-hard supporters attacked a court building on Sunday.
“The unexpected declaration of martial law in early December, coupled with the ongoing political turmoil and the Jeju Air passenger plane disaster, significantly dampened economic sentiment,” the Bank of Korea said in a statement.
A Jeju Air Boeing 737-800 crashed on Dec 29 in southwestern Muan airport, killing 179 people in the worst-ever aviation disaster on South Korean soil.
The political turmoil and crash “led to contractions in domestic consumption and construction investment, likely causing the fourth-quarter growth rate to fall well below the November projection”, the bank said.
“Consumption, which had shown improvement in the third quarter, appeared to weaken again in the fourth quarter,” it said.
As a result, the bank’s Monetary Policy Committee revised down its estimate for the last quarter 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 forecast has been revised downward to 1.6 to 1.7 per cent”, it said.
“This adjustment is primarily attributed to the impact of political uncertainty triggered by the declaration of martial law last December, which has dampened economic sentiment,” it said.
“This is estimated to reduce this year’s growth rate by approximately 0.2 percentage points, particularly affecting domestic consumption and other areas of domestic demand,” it added.
Yoon is the first sitting South Korean president ever to be arrested.
With Yoon behind bars, prosecutors are due to formalise a criminal indictment for insurrection.
He could be jailed for life or executed if found guilty.
Yoon refused to attend questioning on Monday, his lawyers said, with the Corruption Investigation Office – the body in charge of the probe – saying it was looking at whether to compel him to attend.
Yoon has also been absent from the parallel probe at the Constitutional Court, which is considering whether to uphold his impeachment.
If that court rules against him, Yoon will formally lose the presidency and elections will be called within 60 days.