Political uncertainty stemming from the impeachment of South Korean President Roh Moo-hyun may delay a fragile recovery in Asia's fourth-largest economy, the central bank said yesterday.
The warning came as Prime Minister Goh Kun chaired his first Cabinet meeting as acting president amid increasing signs last week's vote to unseat Roh may have backfired on the opposition.
The Bank of Korea's statement on the impact of the impeachment vote was stronger than government comments, which have played down the likely impact of last Friday's opposition vote to unseat Roh on an economy gradually emerging from a brief dip into recession in part because of a weak consumer spending.
"If uncertainty over the impeachment lingers, weak consumption and slow investment could delay economic recovery and hurt employment," the central bank said in a statement.
The bank said South Korea's financial markets had, however, mostly absorbed the shock of impeachment and stabilized -- as the government has also said.
In a sign it wants to keep the economy on track amid crisis but sees no need for fiscal action now, the government said on Monday it would seek an extra budget if necessary but had no immediate plans to do so.
Foreign investors closely watch political stability in South Korea, which already faced a standoff over North Korea's nuclear ambitions and the task of coaxing the economy back to full recovery after a consumer credit bubble burst.
The South Korean financial markets did not react sharply to the central bank's comments. The stock market faltered slightly on external factors but the won moved higher.
"Political unease will remain a heavy burden, keeping investors out of the market," said Jeon Sang-pil, a strategist at Samsung Securities.
Goh has made economic and political stability his priority.
Officials said the Cabinet covered 36 agenda items ranging from credit card delinquency and collaborators during the Japanese colonial period to next month's parliamentary election. Ministers plan to declare a holiday on polling day, April 15.
The opposition-ruled parliament impeached Roh for breaking a law that bars campaigning by public officials. Roh had spoken in support of the Uri Party that backs him. The Constitutional Court has six months to rule on the vote.
Thousands of South Koreans have protested nightly against the vote -- about 4,000 demonstrated on Monday, fewer than at the weekend but still a sign frustrations remain.
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