South Korea’s Ruling Party Gains Strength In Assembly Elections Despite IMF Forecast Of 1.2% Drop In GDP

The landslide victory of South Korea President Moon Jae-in’s Minjoo, or Democratic, Party in the latest National Assembly elections should give his liberal government more latitude than it had previously to push through with economic reforms opposed by conservatives.

With a solid majority of 180 seats in the 300-seat National Assembly, Moon and his advisers are expected to press for ways to rein in the power of the chaebols, or conglomerates, that dominate the Korean economy, while focusing on supporting small and medium enterprises. At the same time, they would like to try to narrow Korea’s rich-poor gap as seen in measures to increase the minimum wage and hold its maximum work week to 52 hours.

The election results reflected confidence in the government’s success in curbing the coronavirus as it spread across the country after breaking out in the place of worship of a Christian sect in Daegu, Korea’s fourth-largest city. Some members of the sect had recently returned from Wuhan, the epicenter of the illness in China.

South Korean medical units have tested more than 540,000 people for the disease, confirming 10,613 cases, including 229 deaths by the weekend, but the number of new cases had fallen to less than 30 a day by the time of the election. Nearly two-thirds of 44 million eligible voters trooped to the polls–the highest turnout in 28 years. All of them had to stand in line at least one meter apart, wear face masks, clean their hands with sanitizers and don plastic gloves before marking boxes on paper ballots.

The election was all the more significant considering that no other country has gone through with a national election while locking down or shutting down offices, stores and schools as the COVID-19 reached pandemic proportions. A number of countries have postponed or cancelled elections and other events at which the virus might spread from close personal contacts.

With the election out of the way, however, Moon’s government faces the daunting task of reviving an economy hit hard by diminishing export markets precipitated by the global slowdown in business and industry, rising unemployment and fading consumer demand.

The government had already come up with a $81 billion emergency program for bolstering companies, many of which were suffering before the dreaded virus reached Korea in late January. The National Assembly last month added $9.5 billion to the package, and this week the finance ministry budgeted $6.3 billion for beleaguered households in need of cash to go shopping for food and other necessities.

Underscoring the country’s economic difficulties, the International Monetary Fund estimates Korea’s gross domestic product will fall by 1.2% this year. That’s a huge setback for an economy that had grown accustomed to hefty annual increases after the 1997-1998 economic crisis.

South Korea’s GDP last year grew by 2.7%, reaching $2.1 trillion for an average GDP of $41,351 among the country’s 51.7 million people. Growth this year, before the onset of the coronavirus, was forecast at 2.2%.

Korea’s “growth prospects are constrained by very weak external demand,” said the IMF, citing “sharply lower growth projections for Korea’s main trading partners.” The IMF was full of praise, however, for Korea’s “comprehensive approach” in dealing with the virus.

“Quick economic policy responses,” it said, had “helped mitigate the negative impact.”