The strengthening of the U.S. dollar, becoming stronger than ever due to the Fed’s interest rate hike by 0.75 percentage points three consecutive times, has created chaos for the global economy. The Korean won to the dollar exchange rate, which passed 1,430 won per dollar, on Monday this week broke through 1,440 won Tuesday, and appears poised to reach 1,450 won. This impacted the Korean stock market as foreign investors quickly withdrew their investments to avoid foreign exchange-related losses. Following Monday’s 3 percent plunge, the KOSPI collapsed by a further 2.45 percent below 2,200 on Wednesday.
The problem is that the impact is not expected to end here. With a plunging British pound triggered by the U.K. government’s tax cuts, a prolonged war in Ukraine, an unpredictable Russia, a Zero Covid-19 policy, and a slowing Chinese economy impacted by the U.S. counterbalance, there are several issues with potential impact on the global economy. All these circumstances raise the risk of a second foreign exchange crisis for emerging Asian economies whose foreign reserves have become depleted due to trade deficits, including Korea.
The domestic economy has contracted as many people feel that asset has been impacted by the economic situation, with housing and stock prices decreasing. The economy will contract even further if large companies hesitate to invest under these severe circumstances amid a strong dollar and recession. It is an emergency for both the global and Korean economies.
Despite such challenges, political circles remain focused on the controversy over President Yoon Suk-yeol’s swearing on video footage during his visit to the U.S. and the removal of the Minister of Foreign Affairs. The Presidential Office and the opposition and ruling parties dispute these issues amid pending challenges that require immediate attention. The political sector appears to focus on legislative issues related to the livelihoods of the people, but they are simply catering to the needs of their political support groups. The national audit of the new government kicks off in October, but it is highly likely to turn out to be a political one.
Political disputes have always been in place, but our current economic situation can be likened to a war. Politicians claim they are concerned about the people's livelihoods, but they remain focused on matters that lead to political exhaustion and blaming. No efforts can be found to develop bi-partial solutions to address the challenges of the semiconductor industry. It is nearly impossible for the public to expect political collaboration. We do not have any time to waste. President Yoon should apologize for the incident and its impact and reach out to the opposition party. The main opposition Democratic Party should give up the idea of dismissing the foreign affairs minister through a single vote and instead focus on the economy. It is time for the President and the leaders of the opposition and ruling parties to sit at the table and put their heads together to find ways to overcome the national crisis.