South Korea: Opposition parties poised to win April 10 election as voters punish ruling PPP

• Voters likely to punish ruling party for failure to reach agreement with doctors
• Opposition DP holds clear lead over ruling PPP in most polls
• Big risk for PPP is if opposition parties reach constitutional majority
• Yoon likely to become lame duck in second half of his presidency, chances for reforms to dwindle

The opposition Democratic Party (PD) and Korea Innovation Party (KIP) are poised to win the upcoming April 10 parliamentary election as voters are widely expected to punish the ruling People Power Party (PPP) for President Yoon's poor recent performance. The President has come under criticism for his failure to negotiate an end to the ongoing doctors' protests, while the recent resurgence of food inflation also reflects negatively on the government's approval rating. Yoon's rating is down to the mid-30% range, which is significantly lower than the approval rating for former president Moon Jae-in in 2020 when it exceeded 50% before the previous parliamentary elections. To remind, the then-ruling DP party won a landslide victory in the 2020 parliamentary election, winning 180 out of 300 seats.

If the PPP loses the 2024 election, this would deal a heavy blow to President Yoon who will be forced to spend the remaining 3 years of his mandate as a lame duck president without power to implement his vision for far-reaching structural reforms. In addition, the pro-Yoon faction in the ruling PPP would likely lose a lot of clout, setting the stage for a new leader to be elected. In essence, the current status quo of the government having to work with the opposition to pass legislation will be likely preserved. However, if the opposition manages to win a two-third majority in the election, which we still think is low-chance possibility, the opposition will be able to pass constitutional reforms and also overturn Yoon's veto on bills. The opposition's control over parliament would also make the candidate of the Democratic Party the natural favourite to win in the next presidential elections in 2027.

Election campaign

The election campaign has been dominated by the ongoing protests of junior doctors who walked off their jobs in late February in protest against the government's decision to expand the medical school quota drastically by 2,000 seats to 5,058 to meet higher demand for medical services. President Yoon's medical school reform was initially welcomed by voters, but public opinion eventually turned against the government due to its inability to negotiate a deal with doctors. The walkout by junior doctors has caused significant disruptions in the supply of medical services since the start of the protests.

The chances for a last minute deal before the April 10 elections remain minimal as President Yoon failed to reach any progress in a meeting with representative of junior doctors on Thursday. The government apparently continues to insist on its original proposal for 2,000 hike of the medical school quota. The opposition DP has taken advantage of junior doctors' protests and has lambasted the ruling party and the President for his inflexible style of negotiating.

Meanwhile, the opposition bloc has been also strengthened by the launch of the Korea Innovation Party (KIP) in early March. KIP was founded by former education minister Cho Kuk who was one of the most controversial figures in the previous Moon Jae-in government. Cho Kuk launched his political party with the idea to end the "prosecutorial dictatorship" which he deems is enabled by the current government. KIP gives another reason to left-wing voters to go to the polls even if they are unhappy with the current leadership of the Democratic Party. At the same time, KIP's launch will not harm DP's odds in first-past-the-post seats as KIP voters are still expected to vote en masse for DP's candidates as KIP does not have any single-member candidates. KIP is projected to become the second-largest party in terms of proportional seats, however. In addition, DP and KIP are very likely to work together after the polls, as KIP is very unlikely to provide support to the ruling party after the election.

Recently, President Yoon's approval rating has also suffered due to the resurgence of food inflation led by the spike in prices for fruits and vegetables. Headline CPI inflation remains above the 3% mark and forces the central bank to keep interest rates high, which creates substantial financial burden for households. Even though economic activity has picked up at the start of 2024, the recovery is mainly focused in the electronics sector and ordinary people still haven't felt improvement in incomes.

Meanwhile, North Korean interference in the election has been fairly limited, in our view, with the communist regime doing only a handful of missile tests since the beginning of the year. Previously, North Korea had launched significantly more missiles before the presidential elections in March 2022. On the other hand, it is more difficult to judge whether North Korea engaged in covert propaganda and other forms of intervention.

Main policy pledges

The collapse in birth-rates has been one of the key topics in the election campaign, with the two main parties giving different proposals on how to resuscitate the birth rate in the country. The Democratic Party has pledged to provide a "basic birth income" package which includes different measures to stimulate births. The package includes doubling of child benefits to KRW 200,000 per months and extension of their duration until age 18. In addition, married couples will be provided a KRW 100mn loan which will become interest-rate free after the birth of the first child and the principal will be reduced by 50% after the birth of the second and third child. The cost of the programme is estimated between KRW 10tn and KRW 23tn and will be funded by reducing government discretionary spending and generating more tax revenues through growth. Meanwhile, satellite party of the Democratic Party, which will compete for proportional seats, has also made a pledge to introduce basic income for children and adolescents worth KRW 500,000 month for children aged 0-7 and KRW 300,000 per month for ten. This goes above and beyond what DP has pledged in terms of expanded child benefits.

On the other hand, the ruling PPP aims to solve the low birth-rate problem by increasing the time parents can spend with their children and by establishing more flexible work time for parents. Moreover, PPP proposes measures to make childcare services more affordable and require elementary schools to provide after-school care programmes to alleviate working parents. The birth rate package will not require any additional spending and will be funded by existing resources in the Employment Insurance Fund. Thus, DP will clearly outspend PPP in terms of pro-birth policies.

DP also has a fairly generous social spending package as it promises to provide basic housing to voters and create a residential complex with 1 million social houses. In addition, it promised to compensate victims of so-called jeonse crimes. Moreover, DP wants to create national universities free of charge and lower the cost of four-year private universities by 50%. On the other hand, PPP doesn't have many social pledges as it bets on trickle-down economics and has proposed additional measures to help SMEs, start-ups and the self-employed.

Foreign policy differences

It should be noted that the election can also have repercussions on foreign policy as the two main parties have different views on how to deal with North Korea, Japan and China. The opposition DP has promised to promote peace and prevent war on the Korean peninsula by creating trust between North and South Korea through humanitarian cooperation and in various other fields. On the other hand, PPP is projected to continue its hawkish stance on North Korea and strengthen the US-Korea-Japan cooperation.

Furthermore, the opposition DP is more China-friendly and is likely to sabotage the strengthening trilateral cooperation between US, Japan and Korea as it distrusts Japan. That said, any changes in foreign policy will be more noticeable after the 2027 presidential elections when DP leader Lee Jae-myung can potentially become president. Still, the 2024 parliamentary elections will also set the stage for the next presidential elections as the winning party will be in the driving seat until the next presidential election.

Opinion polls

Opinion polls have turned against the main ruling party since the time we published?our first election watch report on March 11. According to the weekly Realmeter poll, the rating of the ruling PPP party went from 46.7% in the last week of February to 41.9% in the first week of March, to 37.9% in the second week of March, 37.1% in the third week of March and finally 35.4% in the fourth week. This coincided with the worsening of medical crisis in the country due to the doctors' protests. At the same time, the rating of the Democratic Party has recovered from 39.1% in the fifth week of February to 43.1% in the fourth week of March as voters largely shrugged off concerns about internal strife within the opposition camp. We remind that DP was rocked by several defections earlier this year as some non-mainstream lawmakers who were neglected as candidates for the upcoming parliamentary elections blamed the leadership of the party of trying to stifle internal opposition against DP leader Lee Jae-myung.

Looking at the support for single-member seats, virtually all polls given an advantage to the opposition DP over PPP. On average, some 43.7% of voters prefer DP's candidates compared to 34.3% for PPP's candidates. KIP is not tracked in these polls because the party would support DP's candidates in single-member constituencies.

When it comes to support for proportional seats, PPP's proportional satellite party leads with 30% on average in 4 polls compared to 25% for KIP and 18% for DP's proportional satellite party. Thus, KIP and DP are still expected to win more proportional seats combined than PPP. The conservative New Reform Party is the only other party that is projected to exceed the 3% electoral threshold for proportional seats.

Overall, the opposition bloc clearly has the lead over the ruling party as its support has only gotten higher over the past month. DP's lead is also evident in the own estimates of the two parties regarding who would win the election. PPP expects that it would win with certainty in 90-100 seats out of 254 single member seats, whereas the opposition DP expects a victory in 110 seats or higher. The race in some 50-55 constituencies is too close to call, according to estimates given by the two parties.

Election scenarios

Status quo preserved (67%)

In our view, there is a two-thirds chance that the current status quo will be preserved and the opposition will continue to hold control over parliament to keep government in check, however, in this scenario the opposition will not be able to gain two-thirds majority. This scenarios entails that President Yoon will not be able to carry out any far-reaching reforms in the remaining 3 years of his presidency.

It should be noted that we don't differentiate between the scenarios of DP winning an absolute majority by itself, or when no party is able to reach majority. In case there is a hung parliament, we think that DP and KIP are very likely to work together on key issues and there will be no effective difference for the government compared to the status quo. This is because the ruling PPP and Cho Kuk's KIP party are highly unlikely to find common ground to work together. Ultimately, we think that KIP and DP are likely to merge before the 2027 presidential elections.

PPP wins election (20%)

There is still a small chance of roughly one in five that the ruling PPP will be able to reach a majority in parliament, either alone or with the help of a few MPs from smaller parties. This would be the best-case scenario to see government stability and economic reforms in the remaining 3 years of Yoon's presidency. President Yoon will be able to finish his presidency on the front foot, which would help the next conservative presidential candidate in the 2027 election.

For this to happen, PPP needs to have turned the tide in the last week before the election when no polls will be carried out due to the blackout period. That said, the?last NBS survey?released on April 1-3 showed that PPP's rating increased by 5pps compared to the previous week despite the lack of progress on solving the protests by doctors.

Opposition parties reach constitutional majority (13%)

Finally, we think that there is roughly one-in-eight chance that the opposition will be able to win a landslide victory and gain more than 200 seats in the national assembly. This would put the ruling party in a very tough situation when it has to deal with legislation passed by opposition in parliament. To note, President can veto legislation passed by the opposition party in parliament, but his veto can be overturned by more than two thirds of all MPs.

Two-thirds majority will also enable the Democratic Party to pursue constitutional reforms such as allowing a second term for presidents and bringing government bodies under the jurisdiction of the National Assembly to prevent the government from using them to wreck the opposition, which had been proposed earlier by the opposition.

Legislative framework

Parliament consists of 254 first-past-the-post seats and 46 proportional representation seats. The proportional representation seats are further divided into 16 proportional representation seats using the parallel voting system and 30 additional member seats which are preferentially given to smaller parties that did not win as many single member seats. The electoral threshold for proportional seats is 3% of votes.

The two main parties have formed satellite parties to compete for the 30 additional member seats, which essentially transforms them into parallel voting seats. The satellite parties will compete only for the proportional seats, and not the first-past-the-post seats.

Parliament is unicameral and elections are held every 4 years. Parliament can overturn vetoes of President, but only with a two-thirds majority.

Early voting starts on April 5 and will last until April 7, while the main voting date is April 10.