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Expert Says North Korea Rocket Launch Likely To Have Minimal Impact On The Economy of South Korea

by Dalal Nasif / Feb 19, 2016 12:59 AM EST
South Korea is crushing North Korea's economy as it shuts down the power and water supplies to the Kaesong Industrial Complex located in North Korea as a response to the rocket launch. (Photo by Park Jin-Hee-Pool/Getty Images)

Amid the heightening geopolitical risk brought about by North Korea's ballistic rocket launch last Jan. 7, it was predicted that the aftermath of the bold move against the wishes of the United Nations will include a drop in the economy of its Southern counterpart.

Although South Korea is clearly affected by the current global economic doldrums, economic experts defied the prediction that any negative consequence made by the said missile launch will likely have a minimal impact on the country's long-term economy. 

Some of the cited reasons include that this is not the first time the North has made such strong provocation and just like in its nuclear tests in 2006 and 2009, the recent show of power by Kim Jong Un barely elicited any substantial economic drips in South Korea even though the country relies 30 percent of its market capitalization to foreign investors, as reported by Yonhap News.

Kim Hyung Ryul, a senior market analyst from Kyobo Securities Co., said that the launch may affect foreign exchange rates in the short term, but that is all it could afford.

Experts also noted that the timing of the ballistic missile launch fortunately followed a five-day Lunar New Year's holiday in Seoul which will help to neutralize any worrying effect it has over the stock and foreign exchange markets.

"We have three more days to take a breather," stated Kim. "But we have to check whether the local market will be overwhelmed by other global issues at the same time on Thursday."

Should there be one country mostly affected with North Korea's recent outbursts, it could only be China, being its loyal best friend. The Park administration has long been bugged to distance itself from China due to the latter's refusal to tame the North.

South Korea is now inching away from China's sphere of interests and is moving back to the US-Japan-South Korea security triangle, Asia Times wrote. North Korea has become China's liability both politically and economically.

Meanwhile, South Korea pulled the plug of what was to be known as the last string of peaceful inter-Korean relationship by closing Kaesong industrial complex as a response to the latest provocation by the North.

The jointly-run complex employs about 50,000 North Koreans working at some 120 South Korean companies, giving Pyongyang a total of $515 million since it opened in 2004 according to CNN News.

North Korea is obviously unhappy about the move as it will be losing $100 million a year apart from increasing economic isolation from other countries as part of their sanction for the nuclear and rocket launches. A representative has stated that this brought the North to be in the brink of war against South Korea.

Economic experts' prediction is starting to come true that North Korea's provocative actions will ultimately backfire in the long-run and that the said nuclear and missile launches will barely affect South Korea's economy.

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