South Korea Consumer Sentiment Plunges to 2-Year Low Amidst Political Turmoil

South Korea's consumer confidence has taken a sharp downturn, hitting a more than two-year low in December, as political uncertainty surrounding President Yoon Suk Yeol's impeachment weighs heavily on consumer sentiment, reports Reuters.

The Bank of Korea's monthly survey revealed a significant drop in the Composite Consumer Sentiment Index, falling to 88.4 this month from 100.7 in November. This marks the lowest point since November 2022 when the country grappled with the aftermath of a deadly Halloween crowd crush. An index below 100 signals prevailing pessimism among consumers regarding the economy.

The decline in consumer confidence coincides with the ongoing political crisis stemming from President Yoon's impeachment by parliament on December 14. The move followed Yoon's controversial declaration of martial law on December 3, a decision that sparked widespread protests and uncertainty.

The BOK's data, released Tuesday, underscores the rapid erosion of consumer confidence in the wake of the political turmoil. The Consumer Spending Outlook sub-index experienced a significant 7-point drop, reflecting "worsened consumption sentiment across travel spending, dining out expenses and durable goods," the BOK stated. These categories saw declines of 8 points, 6 points, and 3 points, respectively.

Governor Rhee Chang-yong acknowledged the negative impact of the political situation on the South Korean economy, calling for increased fiscal support and other measures to mitigate the risk of economic slowdown.

The political crisis has also triggered volatility in financial markets. Following Yoon's martial law declaration, the benchmark Kospi index plummeted, while the South Korean won reached its weakest point in 15 years last week.