On April 4, as the Constitutional Court announced the dismissal of President Yoon Suk Yeol, officials at the presidential office in Yongsan, Seoul, were seen lowering the phoenix flag, a symbol of the presidency. (Yonhap)
SEOUL, April 4 (Korea Bizwire) — The Constitutional Court’s ruling on Friday to remove President Yoon Suk Yeol from office has created the first presidential leadership vacuum in South Korea in eight years, casting fresh uncertainty over the country’s already fragile economy.
While the decision resolves months of political limbo that began with the declaration of emergency martial law in December 2024, it also ushers in a new period of unpredictability just as the country grapples with sluggish domestic demand and intensifying trade tensions with the United States.
Economists noted that financial markets reacted positively to the removal of political uncertainty. The Korean won strengthened sharply against the U.S. dollar, dropping 36.8 won to 1,430.2 won by 11:11 a.m. on the day of the ruling. The KOSPI index also shifted upward ahead of the verdict.
“There may be some positive impact on economic indicators simply from the resolution of uncertainty,” said Joo Won, head of economic research at Hyundai Research Institute.
On the morning of April 4, a first-year high school student in Changwon, South Gyeongsang Province, watches the live broadcast of the Constitutional Court’s impeachment ruling against President Yoon Suk Yeol during a Korean history class. (Yonhap)
However, with the presidential election now just two months away, concerns are mounting that political instability could delay key fiscal policies, including the passage of a supplementary budget meant to support small businesses and wildfire recovery.
The timing is especially critical, as Washington recently imposed unilateral reciprocal tariffs—raising the stakes for Seoul to swiftly coordinate a policy response. Analysts warn that without clear executive leadership, South Korea may struggle to protect its trade interests, particularly in ongoing negotiations over non-tariff barriers such as restrictions on U.S. beef imports.
Historical precedent suggests that political turmoil tends to suppress consumer sentiment and private spending. During the impeachment of former President Park Geun-hye in 2016, consumption indicators weakened further after her removal in March 2017.
Similarly, private consumption dipped into negative territory during the 2004 impeachment proceedings against former President Roh Moo-hyun, only recovering months after the motion was dismissed.
“If the political and social unrest continues despite the court ruling, it could further dampen consumption, investment, and the currency,” said Kim Jung-sik, emeritus professor of economics at Yonsei University.
On April 4, travelers at Seoul Station watch the live broadcast of the Constitutional Court’s impeachment ruling against former President Yoon Suk Yeol in the main concourse. (Yonhap)
Hopes now rest on the government’s fiscal policy tools. Some economists suggest the current political climate may prompt both ruling and opposition parties to accelerate negotiations on an emergency spending package.
“Moving into an election cycle could actually speed up supplementary budget approvals,” said Woo Suk-jin, an economics professor at Myongji University. “We may see a more flexible approach to bipartisan cooperation.”
Still, challenges abound. The national budget has been strained by two consecutive years of tax revenue shortfalls, compounded by recent tax cuts favoring high-income earners and large corporations.
The government’s proposed 10 trillion won emergency budget, aimed at supporting disaster relief and small businesses, has faced delays due to disagreements over specific funding mechanisms such as reserve allocations and local currency incentives.
On April 4, at the May 18 Democracy Square in Dong-gu, Gwangju, citizens read special edition newspapers reporting the Constitutional Court’s decision to uphold the impeachment of former President Yoon Suk Yeol.
“Supplementary budgets are most effective when enacted quickly,” said Professor Kim. “But given the political backdrop, passage will be difficult.”
As South Korea enters a sensitive election season, the intersection of political uncertainty and economic fragility poses a major test for policymakers. Whether the country can chart a stable path forward may depend as much on political cooperation as on sound economic strategy.
M. H. Lee (mhlee@koreabizwire.com)
