According to the Zhitong Finance APP, as the political situation continues to be turbulent, there is severe depreciation pressure on the South Korean won. South Korean Consumer inflation unexpectedly accelerated, threatening the price stability system of this country that heavily relies on imported food and Energy. The day before the inflation announcement, due to the slowdown in export growth and some political turmoil caused by President Yoon Seok-youl's state of emergency, business confidence in South Korea weakened. The drop in November's industrial output in South Korea was greater than expected, reflecting the alarm of the economy as the country has been caught in ongoing political turmoil since December.

The South Korean Statistics Bureau reported on Tuesday that the consumer price index (CPI) in December rose 1.9% year-on-year, higher than November's 1.5% and above the 1.7% generally expected by economists. A key economic data released yesterday showed that South Korea's industrial output index in November decreased by 0.7% month-on-month after seasonal adjustment, while the previous month remained unchanged. In contrast, economists generally expected a 0.4% decline in industrial output in November.

Industrial output data is crucial for the growth trend of the South Korean economy, as it relates to South Korea's export trends and overall domestic demand levels. If this data declines more than expected, it may suppress the already weak recovery pace of the South Korean economy.

The latest industrial output and inflation data complicate the monetary policy choices for the South Korean central bank. After consecutive rate cuts in October and November, the unexpected rise in inflation may limit the space for lowering the benchmark interest rate next year. Policymakers are also concerned that a series of political unrest triggered by President Yoon Seok-youl's brief state of emergency, particularly the impeachment of the South Korean president, has significantly reduced business confidence domestically, potentially further weakening South Korea's economic growth.

Inflation rate accelerates again - the continuous depreciation of the won threatens South Korean inflation.

In terms of detailed data, the statistics released by South Korea's statistical agency show that in December, the prices of alcoholic beverages and Tobacco in South Korea declined by 0.4% year-on-year, while food and Non-alcoholic Beverages prices unexpectedly increased by 2.5%. Entertainment costs rose by 1.2%, and utility prices increased by 1.7%.

Analyst Ahn Jae-kyung from Shinhan Investment stated: "In the coming months, the weakening of the Korean won may further intensify the impact on inflation, but the biggest concern right now is the continuous weakening of Consumer confidence. Given the signs of weakness in domestic production and consumption in South Korea, January may be an appropriate time for the Bank of Korea to choose to cut interest rates."

The fatal aviation disaster that occurred on Sunday has exacerbated the challenges facing the country, with all but two of the 181 people on board losing their lives. South Korea's acting president, Choi Sang-mook, announced a week of mourning from today until January 4, which could severely impact Consumer sentiment.

Moreover, since Yoon Suk-yeol's unexpected announcement of a state of emergency, the South Korean political scene has remained turbulent, significantly decreasing the overall business confidence level among South Korean enterprises, and some South Korean SMEs are beginning to worry that certain subsidy policies at the policy level will also be delayed due to the ongoing instability at the highest leadership levels in South Korea.

Bank of Korea Governor Lee Chang-yong had stated before this civil aviation disaster that next year's economic growth in South Korea might not reach the previously predicted growth rate of 1.9%.

Economists generally believe that the increasingly weak private spending in South Korea, the dampening of export rebound under the heavy pressure of Trump's tariffs, and the continuous deterioration of Consumer confidence are core factors prompting the Bank of Korea to accelerate easing measures next year. The actions of global central banks, including the Federal Reserve, in the coming months will also significantly influence the monetary policy decisions of the Bank of Korea.

Regarding the expectations for the core pillar of the Korean economy—export growth, economists expect South Korea to continue achieving export growth in December, marking the 15th consecutive month of year-on-year growth for an economy highly dependent on exports. However, some economists express that they anticipate the global economy, excluding the USA, to remain weak, alongside diminishing base effects, except for the potential continued increase in Semiconductor exports next year. Under the heavy pressure of Trump's tariffs, the global market demand for Korean Commodity is likely to weaken, leading to a significant slowdown in export growth for South Korea over the next year.

Trump, who is set to return to the White House in January, had previously promised to impose high tariffs on imported goods from major global trading partners, including China (which is South Korea's largest trading partner). Economists generally believe that as market concerns about the Trump administration potentially imposing tariffs on more global countries intensify, South Korea's export growth momentum may significantly slow down in the coming year.

The South Korean won has dropped to its lowest level since 2009, highlighting market concerns about the impact on economic growth, but the ongoing depreciation of the won may also limit the extent to which the South Korean central bank can cut interest rates to support the economy," said Bloomberg Economics analyst Kwon Hyoseong.

During the COVID-19 pandemic, the South Korean government implemented massive stimulus measures to support South Korea's economic growth, which subsequently led to a significant rise in consumer prices. Now, many global central banks, including the South Korean central bank, feel confident enough to relax their restrictive monetary policies, as their aggressive rate hikes have helped alleviate inflationary pressures.

Just two weeks after South Korean President Yoon Suk-yeol was impeached by a parliamentary vote, acting President Han Duck-soo was also impeached, an unprecedented event in South Korean politics, prompting the public to protest and demand that the National Assembly quickly select the top leadership to restore normal order in the South Korean government.

Last Wednesday, a total of 192 members of the National Assembly voted in favor of the impeachment, exceeding the 151 votes needed to successfully impeach acting President Han Duck-soo. Following the president Yoon Suk-yeol who initiated the emergency decree, with acting President Han Duck-soo also impeached by the National Assembly, the Deputy Prime Minister and Minister of Planning and Finance Choi Sang-mok took over as acting president, and South Korea's political situation is expected to face more chaos and uncertainty, while the South Korean economy will also face severe challenges before the political turmoil settles.