Gov’t’s economic policies could lose traction post-election

[Photo by Yonhap]

The opposition‘s majority after the April 10th, 2024, parliamentary election in South Korea is expected to put the brakes on the Yoon Suk Yeol government’s economic policy of private sector-led growth, as many of the economic plans announced by the government via its 24 rounds of policy debates in 2024 require legislative amendments.

With this in mind, calls for for bipartisan cooperation in areas of common ground between the ruling and opposition parties, including livelihood and population crisis issues, are growing. In areas with significant disagreements such as corporate policies, there are suggestions for the government to adjust its national tasks via a “select and focus” methodology before seeking cooperation from the opposition.

Maeil Business Newspaper on Thursday compared the government’s priority tasks for 2024 with the pledges of the main opposition Democratic Party of Korea, and the results showed that the most contentious points among major policies were reforming the tax system and nuclear power policy.

The government is pushing to revise tax laws in July 2024, with a focus on inheritance tax relief. It is expected that there will be proposals to shift from taxing the entire estate (inheritance tax) to taxing based on individually acquired property (inheritance acquisition tax). But the Democratic Party is criticizing the move for favoring the interests of the wealthy.

Government policies to address the chronic issue of the “Korea discount” in the stock market are also expected to face obstacles. The government plans to abolish financial investment income tax, which taxes financial investment profits exceeding 50 million won ($36,548) annually at 20 to 25 percent, but the Democratic Party wants to start imposing taxes from 2025.

The government‘s value-up measures, such as taxing dividend income separately and reducing corporate taxes when treasury shares are retired, are also expected to lose momentum.

There is also a significant possibility of contention over energy policy, with the Democratic Party emphasizing its anti-nuclear power policy by pledging to increase the share of renewable energy generation from the current 10 percent to 40 percent by 2035.

With this unclear outlook for nuclear power, nuclear-related stocks plunged on Thursday. According to the Korea Exchange, shares of Doosan Enerbility Co. fell 6.95 percent, while those of Hanshin Air Compressor Co. dropped 9.31 percent and KEPCO Engineering & Construction Co. 8.88 percent.

“It is high time for the government to actively communicate the necessity of its reform tasks to the people and the opposition,” former Korea University President Lee Pil-sang said.