Aftermath of General Election

Korea's ruling Saenuri party failure to win a majority in the April 13 general election is expected to have a negative impact on pushing ahead of the Park Geun-hye government’s key economic restructuring policies.
Korea's ruling Saenuri party failure to win a majority in the April 13 general election is expected to have a negative impact on pushing ahead of the Park Geun-hye government’s key economic restructuring policies.

 

South Korea's ruling Saenuri party failed to win a majority in the April 13 general election for the first time in 16 years. Under the circumstances, concerns are on the rise over the viability of the Park Geun-hye government’s key economic policy including restructuring in the four sectors of labor, public, financial and education and the passage of economic revitalization bills through the National Assembly.

Deputy Prime Minister Yoo Il-ho, who is currently staying in the United States for the G20 Financial Ministers and Central Bank Governors Meeting, said on April 13 (local time) that he was seeking for policy requiring no legislative activities with regard to the restructuring plans. This implies that the South Korean government is seeing the current situation as an emergency and is not sure of the viability of the restructuring plans.

Vice Minister of Strategy & Finance Choi Sang-mok, on his part, had a meeting in Seoul with economic organizations on April 14 and stressed the necessity of the passage of the pending bills. This is regarded as the vice minister calling for their help for the passage of the bills. 

At present, the ruling and opposition parties are in confrontation with each other with regard to the Worker Dispatch Act, the Temporary Workers Act and the Service Industry Promotion Act. Besides, those for college restructuring and regulation-free economic zones are likely to lose momentum as the ruling party lawmakers who proposed the bills failed to win the election.

The South Korean government’s policy tools are likely to become rather limited, too. Its current stance is that a supplementary budget is not required for now but can be resort to once external conditions deteriorate to a significant extent. However, the opposition parties are expected to keep criticizing the government’s economic policy until the presidential election scheduled for next year, remaining opposed to a supplementary budget and expansionary fiscal policy. In addition, the opposition parties are forecast to keep raising their voices for welfare expansion and economic democracy, which implies the government might have to change the direction of its economic policy.

In the meantime, Moody’s said on April 14 that the result of the recent election could affect the credit rating of South Korea. The credit rating agency had raised it from Aa3 to Aa2 in December last year, mentioning the South Korean government’s restructuring drive as a positive factor. “If a legislation delay continues before the presidential election in December next year, the South Korean government’s efficiency can be impaired,” it pointed out. 

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