[Click eStock] "National Trust Decline Realized... Need for Economic Defense Measures"

As the risk of a decline in national credibility due to the 'martial law and impeachment' political turmoil becomes a reality, iM Securities emphasized on the 9th that "it is necessary to pursue policies that minimize psychological contraction and financial market instability to defend the domestic economy."

On the same day, Park Sang-hyun, a researcher at iM Securities, stated, "Negative views from major foreign media and investment banks (IB) regarding domestic political instability are continuing," adding, "Forbes harshly evaluated that 'martial law increases the likelihood of driving Korea into a lost decade like Japan,' and 'the cost of the president's selfish attempt at martial law will be paid by Korea's 51 million people over time, in installments.'

He noted, "Although the aftermath of the National Assembly's rejection of the impeachment motion has not been reflected, considering that the won-dollar exchange rate closed at 1,422.3 won on the 6th, up 4.8 won based on the offshore exchange rate (NDF), further increases are inevitable," and "the prolonged political instability is likely to lead to a contraction in domestic consumer sentiment and corporate investment activities. In the worst case, the gross domestic product (GDP) growth rate for the fourth quarter of this year or the first quarter of next year could record a negative growth trend."

In particular, Researcher Park emphasized, "Fortunately, considering the level of domestic foreign exchange reserves and short-term external debt, the risk of falling into short-term liquidity risk externally is low," but added, "However, since exports can no longer serve as a strong protective shield for the economy, it is necessary to minimize psychological contraction and financial market instability to defend the domestic economy."

Regarding measures to defend the economy, he said, "Although there is some possibility of putting pressure on the won's value, it is necessary to proactively consider monetary easing measures such as an additional interest rate cut in January next year. Fiscal policy should also shift to an expansionary stance," adding, "Additional liquidity policies should be pursued to prevent risks arising from corporate funding shortages. Above all, comprehensive efforts are required to prevent the decline in international credibility of the Korean economy and financial markets. The dollar-based KOSPI index has already approached the adjustment level during the U.S. interest rate hike cycle shock that began in March 2022."

Researcher Park added, "While short-term financial market instability is unavoidable, if the domestic economy does not spiral into a crisis, the scope of further stock market corrections and additional exchange rate increases can be somewhat limited," and "Even if politics is unstable, we must find ways for the domestic economy to remain stable and restore credibility."

This content was produced with the assistance of AI translation services.