"Probability of dismissing President Yoon's impeachment is 30-40%"...Japanese investment bank's forecast [Government Focus]

Uk Jin

Summary

Japanese investment bank Nomura predicted that President Yoon Suk Yeol's impeachment approval probability is 60-70%, which would reduce uncertainty in the Korean economy and accelerate the supplementary budget process.
On the other hand, they assessed that if the impeachment is dismissed or rejected, political uncertainty would increase, the possibility of passing the supplementary budget would decrease, and downward pressure on the economy would grow.
Regarding the base rate cut pace, Nomura suggested possibilities ranging from 0.5 percentage points to 0.75 percentage points reduction depending on the impeachment outcome.

Japanese Nomura forecast..."Probability of impeachment approval is 60-70%"

"If impeachment is approved...economic downward pressure will ease"

"If impeachment is dismissed, supplementary budget will be off the table"

"The probability of dismissal or rejection of President Yoon Suk Yeol's impeachment is 30-40%."

Japanese investment bank (IB) Nomura has forecasted President Yoon Suk Yeol's fate. They predicted a 60-70% probability that President Yoon's impeachment trial will be approved. If the impeachment is approved, they forecast that the supplementary budget process will gain momentum and uncertainty surrounding the Korean economy will decrease. However, in the less likely scenario of 'impeachment dismissal or rejection,' they predicted that the economic downturn would accelerate further.

According to the 'Foreign Perspectives on Domestic Situation' report by the International Finance Center on the 17th, Nomura made this impeachment forecast. As observations suggest that the Constitutional Court's ruling on President Yoon's impeachment trial may come this week, Nomura provided forecasts based on possible outcomes.

Nomura suggested a 60-70% probability of President Yoon's impeachment being approved. If approved, they predicted that political uncertainty would gradually subside, easing concerns about economic downturn. In this case, they also expected the supplementary budget process to accelerate. They estimated that the supplementary budget would exceed 20 trillion won.

Nomura predicted that if the supplementary budget gains momentum, the Bank of Korea's pace of interest rate cuts would slow down. They expected that while maintaining a gradual rate cut stance, the base rate would be reduced by 0.5% points by the end of this year. The current base rate of 2.75% per annum is expected to decrease to 2.25% per annum.

Conversely, they forecast a 30-40% probability that President Yoon's impeachment trial request would be dismissed or rejected. In this case, they believed political uncertainty would deepen further. Political tensions would rise, and as the political standoff continues, consumer sentiment would contract further. This would increase downward pressure on growth. They also predicted that the possibility of passing the supplementary budget bill would decrease. With increased pressure on the Bank of Korea to cut interest rates, they forecast that the base rate would be reduced by 0.75% points by the end of this year. This analysis suggests that the current base rate of 2.75% per annum would fall to 2.0% per annum.

Reporter Kim Ik-hwan lovepen@hankyung.com