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[Alpha Biz= Paul Lee] Global credit rating agency Moody’s has warned that political and economic uncertainty is likely to persist in South Korea despite the removal of former President Yoon Suk-yeol from office, and that prolonged political tension could have a negative impact on the country’s credit rating.


According to financial industry sources on Sunday, the assessment was made in a recent report issued by Moody’s following the Constitutional Court’s decision to uphold Yoon’s impeachment.


“The impeachment of former President Yoon has opened the door for resolving the leadership vacuum, but it is unlikely to eliminate underlying political and economic uncertainty,” Moody’s stated. “Given the deeply divisive nature of the ruling, ongoing street protests are expected.”


While acknowledging that South Korea’s institutions and policymaking frameworks generally function effectively, Moody’s warned that “a prolonged period of heightened political tension that impedes economic activity or delays the government’s response to growth challenges would be credit negative.”


The agency also expressed concern about the internal fractures within the ruling People Power Party in the wake of Yoon’s impeachment. “Considering the short election timeline and uncertainty surrounding the main candidates, the impeachment has further deepened internal divisions within the People Power Party, which lacks a clear frontrunner,” the report said.


Moody’s further noted that the tight election schedule could hinder the clarity of economic policies presented by candidates, at a time when South Korea is facing multiple economic headwinds. “Policy clarity is particularly critical now, as the country confronts a range of economic challenges,” it added.


Among the key risks highlighted were shifts in U.S. trade policy, potential amendments to the Inflation Reduction Act (IRA) and the CHIPS and Science Act, which could negatively impact South Korea’s key export sectors, including automobiles, semiconductors, and batteries.

 

 

 

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