South Korea’s business confidence tumbles by most since pandemic

SOUTH Korea’s business confidence deteriorated the most since the global outbreak of Covid-19, reflecting mounting concerns about an economy grappling with political turmoil and facing Donald Trump’s tariff threats.

The business outlook for January fell 7.3 points to 82.4 in the Bank of Korea’s (BOK) composite sentiment index, marking the biggest month-on-month slide since April 2020, according to data released on Friday (Dec 27). The survey of almost 3,300 firms was conducted between Dec 11 and 18, and follows a separate consumer confidence index that fell by the most since March 2020 this month.

The two surveys illustrate the economic fallout after President Yoon Suk-yeol briefly declared martial law on Dec 3, plunging the nation into crisis, causing the won to slump against the US dollar and rattling investor confidence. Yoon is now waiting for a Constitutional Court ruling on an impeachment motion that was passed against him by the opposition-led parliament on Dec 14.

South Korea was already facing economic challenges before the martial law debacle, with export momentum starting to cool on weaker semiconductor demand, and worries about Donald Trump’s return to the White House and his protectionist policies.

The central bank said on Wednesday it would reduce its benchmark interest rate further next year, after making back-to-back cuts in late 2024 as part of a policy shift. Economists are increasingly speculating the BOK may accelerate its easing cycle as the economy slows more quickly than anticipated. BLOOMBERG