President Park Geun-hye has suffered a number of political setbacks since taking office in February. This includes the forced withdrawal of four prospective Cabinet nominees from consideration owing to various transgressions or questionable affiliations, allegations that agents of the National Intelligence Service engaged in illegal political activity on behalf of Park’s presidential campaign, and accusations that her top aide committed sexual assault during a state visit to the U.S. in April.

Not surprisingly, the president’s approval rating has slumped badly since she took office. Nevertheless, it still remains close to 50 percent in large part to the electorate’s favorable assessment of her response to saber-rattling by North Korea.

At present, peninsular tensions have eased to baseline levels. Although plans to hold the first face-to-face discussions since North Korea attacked a South Korean warship in 2010 failed to materialize, with each side blaming the other for the breakdown, the fact that the two countries are even discussing talks represents progress compared to the bluster that characterized the exchanges between north and south earlier in the year.

The heightened tensions in recent months were at least in part attributable to an effort by the north to test the resolve of a new president, and the hope is that relations will improve once Park has proven she is up to the challenge. Moving forward, an important barometer will be whether the countries can come to an agreement on the Kaesong Industrial Zone. The economic importance of the zone to North Korean workers is one reason to be optimistic that business operations will be resumed.

South Korean household debt-to-disposable income ratio is one of the highest among the world’s advanced economies.

If North Korea adopts a less confrontational tone, economic issues such as job creation and income inequality will almost assuredly regain their position as the top areas of concern for South Koreans. Already anticipating as much, Park’s government has prioritized social spending in a way her predecessors did not. After taking office, Park promised the government would spend $125 billion over the next five years to increase state pensions while also providing debt relief to distressed households.

Although there is some concern about the precedent the government is setting with its debt relief program, any effort to boost the economy by addressing the country’s household debt levels would be welcome. According to Bank of Korea data, the country’s household debt-to-disposable income ratio is the highest in nearly a decade and one of the highest among the world’s advanced economies.

About The Author The PRS Group

The PRS Group is a leading global provider of political and country risk analysis and forecasts, covering 140 countries. Based on proprietary, quantitative risk models, the firm's clientele includes financial institutions, multilateral agencies, and trans-national firms.




www.prsgroup.com