Implications of South Korean Elections: Economic Stasis at Home, National Defense Abroad
April 14, 2016
The Saenuri Party’s poor showing in the April 13 General Elections for the 20th National Assembly will be read as a sound defeat for the ruling party and for the Park administration. The results come as a surprise and were inconsistent with the pre-election polling. The 105 seats won by Saenuri falls far short of the 150-160 range expected for the ruling party (122 for Saenuri, 123 for Minjoo Party, and 38 for People’s Party including proportional seats). What does the result mean?
- Political gridlock: The absence of a majority for any party spells political gridlock in the legislature for Park’s remaining time in office.
- Policy Stasis: Gridlock will mean Park’s structural reform initiatives – in particular, labor reform – will not be acted on. The Saenuri Party had been supportive of quantitative easing policies prior to the election, which will not be acted upon either.
- More Voice: The progressives will gain greater voice. The opposition Minjoo Party and People’s Party will continue to criticize the government for high unemployment rates, sluggish growth, high household debt, the need to increase the minimum wage, but at the same time will handcuff Park from carrying out any policies to address the situation.
- Pressure on Base Rate: Policy stasis in the legislature could create more pressure on the Bank of Korea to cut rates as an attempt to spur growth, though this measure is unlikely to have the desired effect.
- Presidential politics: All focus in Korea will turn to the presidential election in 2017 with pitched battles within each party for leadership as they head towards their party conventions in the summer. Perhaps the biggest winner from this election as we look to 2017 is UN Secretary-General Ban Ki-moon. It is conceivable that both the ruling party and opposition party will reach out to court his candidacy. Ahn Cheol-soo may also turn out to be a strong candidate for the 2017 presidential elections given the unexpected strong results in this election from his newly created People’s Party.
- Focus on National Defense: Given the trajectory of the North Korea problem and political gridlock at home, Park’s remaining time in office will focus on ensuring national defense including missile defense and tighter defense cooperation with the U.S. The electoral results could put pressure on Park to seek reconciliation of some form with the North, but this is not likely given continued bad Pyongyang behavior.