A legislature controlled by the opposition will ensure that the administration will have little success in policymaking
The People Power Party’s (PPP) minority position in the legislature will ensure that policy deadlock persists in South Korea until the end of President Yoon Suk Yeol’s term in 2027. The ruling party failed to secure a majority position in the National Assembly, while the opposition parties fell short of a supermajority of 200 seats that would empower them to impeach the president or overrule his veto power. As a result―barring an unprecedented level of cooperation between the two major parties―only those policies that command bipartisan support are likely to be passed in the legislature.
The policies proposed by President Yoon that are likely to face the greatest pushback in the National Assembly are related to private sector deregulation and labor market reforms. These policies were some of his signature campaign promises and were used to position President Yoon as a pro-business leader; for example, a reduction in the corporate tax rate, fewer regulations on M&A and IPO activities, a delay in leveling capital gains taxes, limitations on labor unions’ ability to call strikes, and easier redevelopment of real estate. As it is highly unlikely that these policies will now pass the National Assembly, firms should not bank on meaningful improvement in the operating environment in South Korea. In fact, given the PPP’s defeat in the election, opposition parties and labor unions may be emboldened. This will raise the risk of delayed policy execution (as we saw in this year’s budget approval process) and future labor strikes as well.
Overview
Last week’s legislative elections ended in a resounding defeat of the ruling People Power Party. President Yoon’s party—which was already in a minority position prior to the election—saw its seat share fall from 114 to 108 in Korea’s 300-seat National Assembly. The key opposition party, the Democratic Party of Korea (DPK), increased its majority position from 156 to 175 seats. The newly elected legislature will convene on May 30.
Our View
Korea’s legislative elections tend to serve as a referendum on the sitting president, and last week’s election clearly showed that President Yoon has failed to command adequate support from the public. Factors such as high inflation levels, his actions to increase quotas in medical schools and ensuing response to doctor strikes, as well as corruption allegations against the first lady have led to widespread voter discontent. The election results ensure that President Yoon will be unable to execute on his policy promises and that there will be continued policy deadlock in the legislature.
There is also a risk of greater political instability after the election due to a stronger opposition and uncertainty within the ruling party. The DPK, emboldened by a strong showing in the election, will look to exert greater influence over policymaking and is unlikely to compromise with the PPP unless major concessions are granted. Given the increased hostility between the two parties in recent years, such cooperation will be hard to achieve. The PPP will also look to restore support among the public through internal changes. The prime minister and the PPP’s campaign leader both offered their resignations after the election, and President Yoon also promised an overhaul of his administration to respond to voter concerns.
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