Economic Expectations and Policy Directions Following the South Korean Presidential Election

Key Chapter Title List

1. Economic and Financial Market Outlook Following the 2025 Election Results
2. Bond Market: Rising Possibility of Increasing Government Bond Yields
3. Analysis of Korean Stock Market Trends Before and After Past Presidential Elections
4. Industry-Specific Outlook Based on Election Pledges
5. Summary of Major Beneficiary Sectors Based on 10 Core Pledges
6. FX: The Korean Won Expected to Move Steadily
7. Bond Market Investor Concerns and Fiscal Soundness Issues
8. Economic Policy Areas and Registrations of President-elect Lee Jae-myung
9. Analysis of Overseas Case Studies and Impacts Based on the 4.5-Day Work Week Pledge
10. Analysis of Relative Returns and ETFs by Major Beneficiary Sector

Document Introduction

This report provides an in-depth analysis of the macroeconomic environment, financial market expectations, and potential policy directions following the early presidential election in South Korea in 2025 and the election of Lee Jae-myung, the candidate from the Democratic Party of Korea. The core of the report lies in assessing the potential policy mix and its market impact under the new administration (expected term 2025-2030 under the Sixth Republic system), which faces the dual challenges of sluggish domestic economic growth (2025 growth rate expected to fall to the 0% range) and drastic changes in the external trade environment (particularly policies during the second term of a Trump administration). The research timeframe covers the period before and after the election and the policy implementation phase over the coming years, aiming to provide professional investors and policy analysts with a deep assessment based on realistic political and economic scenarios.

The report structure systematically covers several key dimensions. First, at the macro level, it focuses on expansionary fiscal policies such as supplementary budgets that the new government may rapidly introduce to stimulate economic growth and restore public livelihood, as well as trade policy negotiations to address external risks (e.g., US-Korea tariff negotiations). Second, the financial market analysis emphasizes the bond market, anticipating that active fiscal policy will push up government bond yields, especially long-term rates, and put pressure on the national debt ratio and fiscal soundness. Regarding the stock market, the report reviews historical market volatility patterns around elections, noting that domestic major events themselves have limited impact on market trends, while external events (such as the global financial crisis, the Russia-Ukraine war) and Korea's fundamental growth potential are more decisive. The report expects that large-scale supplementary budgets and value-up policies may bring different market momentum compared to the past.

At the industry and micro level, the report details the core economic pledges of candidate Lee Jae-myung and assesses potential beneficiary industries accordingly. These areas include: AI, software, and data center infrastructure to build a foundation for becoming a top-three AI power; the new energy industry integrating energy policies and expanding renewable energy (especially wind power); the construction and construction machinery sectors benefiting from the administrative capital relocation, expansion of rental housing, and investments in data centers and social infrastructure; the defense industry primarily supported by exports; and the financial sector including holding companies, banks, and securities, which are gaining attention due to expected revisions to the Commercial Act and expanded shareholder returns. Using the 4.5-day work week pledge as a specific example, the report cites pilot cases from countries like Iceland and the UK, analyzing its potential positive effects (e.g., productivity increase, improved employee well-being) and practical limitations (industry differences, small sample issues, potential productivity decline risks), concluding that its implementation requires a gradual and cautious approach.

Finally, the report assesses the foreign exchange market, noting that regime changes have historically had a limited impact on the USD/KRW exchange rate. As a high-risk currency heavily dependent on the global trade environment, the won's exchange rate is primarily driven by external factors (such as uncertainty regarding US tariff policies). With the new government restoring administrative functions, normal diplomatic activities like tariff negotiations are expected to proceed more smoothly. Coupled with potential improvements in domestic growth expectations due to fiscal stimulus, the won's exchange rate in the second half of the year is projected to show a gradual downward trend with a floor around 1300 won. The report is based on multiple sources including data from South Korea's Ministry of Economy and Finance, the Bank of Korea, Bloomberg, internal research models, and historical election data, striving to provide a comprehensive, objective, and forward-looking picture of the Korean political and economic landscape.