(Bloomberg) — South Korea’s consumer confidence dropped by the most since the outbreak of Covid-19 this month, battered by the political turmoil triggered by President Yoon Suk Yeol’s declaration of martial law and his impeachment.
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The composite consumer sentiment index slipped 12.3 points to 88.4 in December, falling well below the threshold of 100 that divides optimism and pessimism, according to a Bank of Korea survey released Tuesday.
That’s the biggest slide since the World Health Organization declared the pandemic in March 2020, sending global consumer sentiment tanking.
Yoon declared martial law on Dec. 3 in a move that rattled financial markets from stocks to currencies, prompting the BOK and government to pledge “unlimited liquidity” if necessary.
Greater political uncertainty and financial volatility are the main factors that dented confidence among South Koreans in December, the BOK said in the survey conducted between Dec. 10 and 17.
While Yoon retracted his decree within hours, parliament punished him on Dec. 14 by approving an impeachment motion that the Constitutional Court will now deliberate. Yoon remains suspended from power, with Prime Minister Han Duck-soo serving as his stand-in.
The latest survey shows how the events have impacted consumer sentiment, raising concerns about a further slowdown in private spending.
Sentiment about the economy plunged 18 points from a month earlier while the outlook for the next half year dropped by the same margin, the survey showed. The outlook for consumer spending dipped 7 points while the prospect for home prices fell 6 points.
Speculation is increasing among economists that the BOK may consider a rate cut in January to respond to the headwinds rising for the economy as the political uncertainty rumbles on.
The bank conducted back-to-back cuts in October and November as it sought to brace the export-reliant economy for the potential impact of Donald Trump’s return to power and his tariff plans.
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