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  • 작성자 : 권진현
  • 소속 : Korea International School Jeju official club BERA (Business Economics Review Associates)
  • 등록일 : 2025.02.14
  • The Economic Impact of Martial Law in South Korea.

By Gapjae Choi
Imposed martial law in Korea significantly contributed to the decline of business operations, strikes by employees, and decreased foreign investment in its economy. Financial markets started behaving erratically, and the rate of growth of GDP became slow while inflationary pressures made life miserable. Even after the suspension of martial law, problems remained persistent: a weaker won, high consumer prices, and weak domestic demand. The authorities struggled to balance interest rate policies to stabilize the exchange rate while not slipping into a prolonged recession, thus leaving businesses and consumers cautious as they watched government policies for recovery signs.
After martial law, the economic situation became extremely unstable. In particular, the won-dollar exchange rate surged up to 1,472.5 won with a 5.3% increase in only one month and ranked second in the world next to the Russian ruble. Decline of the currency increased consumer prices, especially petroleum and other products, because of seasonal demand in Lunar New Year. As business confidence declined, six out of every ten major companies revised their plans in reflection of a 1,300 won exchange rate. At the same time, retail sales fell 2.1% year-on-year, which was the steepest decline since 2003, and credit card use in December retreated 9.9% on political instability. Consequently, consumers cut spending, while businesses turned cautious about investing. With exchange rate stability and domestic demand, the balancing remained elusive, thus requiring a difficult prioritization of the economic strategies by policymakers to prevent further decline.

Assisted by financial aid and economic reforms, the government tried to reduce this effect; still, industries took years to get back on their feet, and investor confidence did not arrive very easily. More clearly perceiving disruptions to the economy brought by martial law permits more effective analysis both of policy decisions and of their relationship to national recovery. It remains highly relevant to consider how economic strategies that were pursued evolved, along with the lingering impact such policies have on the Korean economy.


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