[Reporter’s Notebook] Korea’s Lonely Battle in the Economic All-Out War

The Biggest Risk is Uncertainty
Exchange Rate Fear Burdens Companies and Citizens

The business community's feelings toward the impeachment crisis reveal a sense of anxiety. This is because uncertainty has increased due to the gloomy forecast that next year's economic growth rate will fall to the 1% range, compounded by the aftershocks of President Yoon Seok-yeol's martial law incident. The sentiments of a recent executive at a major corporation are no different. He expressed concern, saying, "Uncertainty is the greatest risk for companies."

Although the martial law incident ended within just a few hours, its repercussions continue to linger. The exchange rate issue is pushing battery, refining, and petrochemical companies?who need to import raw materials?into deeper crisis. The won-dollar exchange rate, which surged to 1,440 won during the martial law period, has maintained the 1,420 won range but is rising with momentum to break through 1,430 won on the 9th. Many interpret this as also due to uncertainty. After the impeachment motion against President Yoon was dismissed in the National Assembly on the 7th, it became difficult to gauge the future political direction, causing investment funds to withdraw, which led to this phenomenon.

When the exchange rate rises, large corporations operating in the global market bear a huge burden of foreign exchange losses. Battery company LG Energy Solution reportedly holds about 6.83 trillion won in dollar-denominated debt as of the third quarter, exceeding its dollar assets of 4.44 trillion won. This means the amount of debt to be repaid grows every time the exchange rate rises. Companies that made large-scale investments to respond to the U.S. Inflation Reduction Act (IRA) are inevitably more sensitive to exchange rate risks.

The overall industrial situation is also challenging. The petrochemical industry is reducing its business structure and working on improving its fundamentals as profitability worsens due to China's low-price offensive. The electric vehicle battery industry is focusing on strengthening its internal capabilities by postponing investment plans in preparation for a chasm (temporary demand stagnation). While the industrial sector is enduring the crisis by devising self-help measures, companies insist that government-level support is urgently needed.

The economic control tower, which should maintain stability, is effectively not functioning. The current government's economic team, including the Deputy Prime Minister for Economy, has vowed not to waver, but the situation is such that even next year's budget decision is uncertain. The opposition party has announced plans for additional cuts.

All cabinet members have previously tendered their resignations. Follow-up personnel appointments remain unclear. Major economic policies are being delayed or drifting. The plan to strengthen petrochemical competitiveness, scheduled to be announced earlier this month, has been postponed indefinitely. The clocks of key ministries such as the Ministry of Trade, Industry and Energy and the Ministry of Economy and Finance have effectively stopped. President Yoon has stated his intention to delegate all state affairs management to the ruling party leadership and step back to a secondary role.

It is unknown who will take the lead in managing the severe national economic turmoil currently unfolding. The entities fully bearing the political uncertainty are companies and citizens. In the global economic all-out battle involving even governments, South Korea is fighting a lonely fight alone.

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