South Korea: new president, new policies

South Koreans have elected conservative Yoon Suk-yeol to be the country’s next president. The vote was the closest in Korean history, with Yoon beating rival Lee Jae-myung, the candidate of the governing centre-left Democratic party, by less than 1%. Yoon will take the reins of the world’s tenth-biggest economy from incumbent Moon Jae-in in May.

The campaign saw “unprecedented levels of toxic rhetoric, mudslinging and lawsuits”, says the Associated Press. Moon’s two immediate predecessors have both been convicted on corruption charges, a sign of a deep-rooted rot in South Korean politics.

The economy finished 2021 “on a strong note, with GDP up 4.1% year-on-year in the fourth quarter”, says IHS Markit. Exports soared 26% to a record high of $645bn last year thanks to strong global demand for semiconductors, petrochemicals and cars.

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Yet ordinary voters are not feeling prosperous, says Steven Borowiec for Nikkei Asia. “The South Korean public is increasingly anxious over growing inequality, particularly in the form of housing prices, which skyrocketed under Moon.” Many younger voters backed Moon at the 2017 election, but the housing situation and youth unemployment prompted many of them, especially “angry young men”, to switch to Yoon this time, says Sotaro Suzuki, also in Nikkei Asia.

Balance of power

Yoon’s victory could “reshape the balance of power in East Asia”, says Phelim Kine for Politico. Previous Korean governments have tried to balance the US, the country’s key military ally, with China, its biggest trading partner. Yet “public antipathy toward China” is rising. Yoon is likely to align the country more closely with the “quad”, a “regional geostrategic grouping” of the US, Japan, India and Australia.

Meanwhile, the promise of new economic policies could bring renewed vigour to a stockmarket that is down 11% this year. Nuclear energy, tech and construction stocks bounced on Yoon’s victory. Yoon’s party “promotes market-led solutions and a relatively light role for the government” as well as “renewed support for nuclear energy”, says Scott Snyder at the Council on Foreign Relations.

South Korea is still classed as an emerging market by index provider MSCI, despite a GDP per capita similar to Italy’s, says Frances Yoon in The Wall Street Journal. Korean equities trade at a discount to those in comparable markets. An upgrade to developed status could bring $44bn in foreign investment, says Goldman Sachs. That will require the authorities to liberalise currency markets, which have remained tightly regulated since the 1997-1998 Asian financial crisis. If an upgrade comes, it will probably not happen until “2024 at the earliest”.