Korea's economic outlook has dimmed, with global investment banks lowering their growth projections amid a turbulent political landscape. As the nation grapples with internal uncertainties, including political instability and weak consumer sentiment, the risk of entering a prolonged low-growth phase is becoming increasingly likely. This situation requires decisive action from both the government and opposition parties to revive the economy. It's time to move beyond partisan divisions and focus on working together for the greater good.

Concerns about the Korean economy are growing and are justified. In late 2024, major global financial institutions, including Barclays and Goldman Sachs, downgraded their growth forecasts for Korea to an average of 1.7 percent, a significant reduction from earlier predictions. The Bank of Korea and the Ministry of Economy and Finance had originally projected growth rates of 1.9 percent and 1.8 percent, respectively, but these expectations now appear overly optimistic. The most alarming downgrade came from JP Morgan, which cut its estimate from 1.7 percent to just 1.3 percent. This decline reflects a slowdown in domestic consumption and ongoing political instability, particularly after the controversial martial law declaration on Dec. 3, which has deepened public mistrust.

The primary reason for this downgrade is the troubling stagnation in consumer sentiment. Korea's economy has traditionally relied on exports, but when global demand declines and the political environment remains unstable, domestic consumption becomes a vital counterbalance. Unfortunately, with consumer confidence stagnating due to ongoing political uncertainties, the anticipated recovery in consumption remains out of reach. Even the government's recent decision to designate Jan. 27 as a temporary holiday to stimulate spending is widely viewed as a short-term fix rather than a long-term solution.

Further complicating the situation is the depreciation of the Korean won against the U.S. dollar. With the start of the second Trump administration, fears of heightened tariffs and trade tensions are weighing heavily on Korea's economic prospects. Political gridlock in the National Assembly has left critical reforms in limbo, and without a concerted, bipartisan effort, these legislative hurdles will continue to hamper efforts to revive economic growth.

In this climate of uncertainty, one thing is clear: the government must inject fresh capital into the economy. The recently downsized budget, heavily influenced by the opposition Democratic Party of Korea (DPK), is simply not enough to weather the storm. The DPK's influence has led to a reduction in budgetary allocations, making it more difficult for the government to implement the necessary economic policies. As global growth slows, Korea must look to internal measures to bolster its economy, and an extra budget bill is the most viable option.

In a positive development, the ruling People Power Party (PPP) and the government recently held a consultative meeting to discuss the need for a 10 trillion won ($6.86 billion) fund to mitigate the potential negative impact of U.S. tariffs. However, the DPK has pushed for a more ambitious stimulus package of 20 trillion won. While political parties continue to argue over the details of the budget, the situation requires immediate action. Partisan disputes can no longer be allowed to obstruct the recovery of the economy.

It is imperative that political leaders put national interests above party politics. The national economy, the livelihoods of Korean citizens and the country's international standing are at stake. The consultative meeting between the PPP and government representatives offers a glimmer of hope, but more must be done. The focus must be on legislating critical bills that can provide long-term stability, such as the Semiconductor Special Bill, which is currently languishing in the National Assembly. The semiconductor industry remains a cornerstone of Korea's export-reliant economy, and ensuring its competitiveness in the global market must be a priority.

Furthermore, warnings from the state-run Korea Development Institute (KDI) cannot be overlooked. The KDI recently issued a report highlighting the significant decline in economic sentiment, driven by increasing external and internal uncertainties. With the global economy facing challenges and domestic political turmoil eroding the effectiveness of policies, the pressure on Korea's economic recovery continues to intensify.

Korea's future depends on its ability to break through political gridlock and implement bold economic measures. A unified, bipartisan approach is crucial to tackling the current challenges and setting the stage for long-term growth. The government must act swiftly to pass a supplementary budget and push forward essential reforms. The time for delay has passed — Korea's economy urgently needs decisive action now more than ever.