As South Korea grapples with the fallout from a brief declaration of martial law on 3 December 2023, the tourism and hospitality sectors are experiencing unease, leading to cancellations and market instability. With a significant portion of the economy hinging on tourism—accounting for about 3.8% of GDP—these developments raise concerns about the industry’s rebound from the pandemic.
Impact on the Tourism Sector
Following the martial law episode, which was swiftly rescinded, the effects on South Korea’s tourism have become apparent. In the capital, Seoul, a notable shift has occurred:
- Tourist cancellations have increased, with many visitors reconsidering their travel plans.
- Accor hotels reported a cancellation rate bump of 5%, while the Korea Tourism Start-up Association noted that bookings for the first half of 2025 have seen a sharp decline.
- Some hotels are lowering rates or offering special promotions to attract guests.
Seoul’s mayor Oh Se-hoon emphasised the city’s safety, stating, “Seoul is safe” in multiple languages to reassure potential visitors.
Economic Instability and Market Responses
The political turmoil has also shaken financial markets. Following the martial law announcement:
- The Korean won fell to a two-year low, dropping to nearly 1,435 won against the US dollar.
- South Korea’s main stock market index, KOSPI, lost approximately S$53.3 billion within the days after the martial law declaration.
As the government attempts to regain stability, Finance Minister Choi Sang-mok indicated the economy remains resilient while outlining measures to manage volatility.
Political Gridlock and International Relations
The ruling People Power Party (PPP) and the opposition remain in a standoff over President Yoon Suk-yeol’s leadership amid calls for impeachment. Recent political maneuvers have led to concerns about:
- A lack of decisive leadership impacting foreign relations.
- Potential delays in critical international engagements, including the Asia-Pacific Economic Cooperation (APEC) summit scheduled for 2025.
Experts like Dr Troy Stangarone from the Washington-based Wilson Centre suggest that while the immediate impacts may be sharp, once the situation stabilises, South Korea’s economy may not face long-term challenges similar to those during the impeachment of former President Park Geun-hye.
What Lies Ahead?
The coming weeks will be crucial for South Korea as it navigates through political turbulence. The effectiveness of current government strategies to secure both the economy and international relations will determine the speed of recovery for the tourism sector and broader economic stability.