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South Korea finance minister seeks policy consistency after vote defeat rattles ratings agencies
[SEOUL] South Korea's finance minister on Monday stressed the importance of policy consistency after defeat for the ruling party in a parliamentary election raised questions about the government's ability to implement key economic reforms.
"As much as there are concerns from ratings agencies like Moody's and Fitch on whether structural reform can be sustained after the recent parliamentary election, keeping policy consistent is important," Finance Minister Yoo Il-ho told senior ministry officials in a meeting.
Mr Yoo met with his ministry officials soon after his arrival from overseas where he participated in meetings of the International Monetary Fund and G20 finance ministers and central bankers last week.
South Korea's ruling conservatives suffered a surprise defeat in a parliamentary election last weak, prompting ratings agencies to voice concerns about President Park Geun-hye's ability to pursue her reform agenda to boost a sluggish economy.
"The (Saenuri) Party's loss of its plurality in parliament will make it more difficult for President Park Geun-hye to pass proposed structural reforms. This is credit negative because a lack of reforms threatens to weigh on Korea's growth outlook," Moody's Investor Service said in a report on Monday.
"If legislative delays worsen ahead of Korea's next presidential election, scheduled for December 2017, it could reduce the government's ability to pass credit-positive reforms," the ratings agency said, noting the frequently deadlocked parliament even before last week's elections.
Currently, three key proposals to reform the labour market, boost the services industry and ease regulations in Asia's fourth-largest economy are sitting in parliament.
Last week, Fitch Ratings said the election results increased risks to the South Korean economy.
The election result "will likely make passage of any potentially contentious legislation, including that pertaining to labour market and services sector reforms, more difficult," Fitch said.
The finance minister also urged the officials to step up efforts for proposed structural reforms to be passed through parliament before the outgoing lawmakers' term officially ends in late May.
The elected parliament will start work on May 30.