Park Geun-hye scandal slows South Korea's economy

The Dollar Business Bureau

Ongoing impeachment of South Korea's President Park Geun-hye has heavily weighed on the country's economy, as it shows a quarterly growth of 0.4% (October-December 2016), slowest in more than a year.

Due to reducing consumption and weak consumer sentiment in a politically unstable environment, South Korea's GDP grew only by 0.4% during the last quarter of 2016, compared to previous quarter's growth of 0.6%. In comparison with the same period (October-December) in 2015, the GDP expansion has slumped from 0.7% to 0.4%.

Not sounding very optimistic, Chung Kyu-II, Director, Bank of Korea, said, "It is hard to say the overall picture is positive. Weakened private consumption, which accounts for around half of the GDP, is most to blame.”

Private consumption expanded 0.2%, in comparison with 0.5% in the previous quarter (July-September 2016) and 1.4% in the last quarter of 2015. Similarly, the growth of government consumption expenditure came down from 1.4% in the third quarter of 2016 to 0.5% in the fourth quarter of 2016.

Demonstrations of gargantuan scale have emerged in South Korea, demanding impeachment of the President, after a string of allegations related to bribery, indiscreet disclosure of government information and dubious company holdings came to light. The President is currently under suspension, after the National Assembly, on December 9, 2016, impeached her by a majority vote count of 234 supporters.

Park Geun-hye has primarily been accused of working under the influence of a close personal ally, Choi Soon-sil, and aiding her in extortion of large sums of money from some of the country's big businesses. The fate of the first woman President of South Korea, who also has the lowest approval ratings in the history of Korean leaders, will be decided by South Korea's Constitutional Court, after conclusion of her ongoing impeachment trial.

Meanwhile, globally renowned South Korean companies like Samsung and Hyundai also got summoned to the impeachment proceedings to face ruthless interrogation regarding their possible involvement.

Keeping in view the weakening economic sentiment, the Bank of Korea has downgraded its growth predictions for 2017 to 2.5%. Interest rates have been maintained at record lows for seven months now.