Korean Economic Outlook for 2025

Abstract

The domestic real economy shows signs of weakness despite robust export growth in semiconductors and an upturn in facilities investment, as sluggish consumption and construction investment continue to dampen overall performance. Slack private consumption in particular weighing on the economy, in spite of increases real income, lower interest rates, and price stabilization.

It is likely that the prolonged period of high inflation and high interest rates have conspired to constrain the pace of recovery. Facilities investment has rebounded from an extended slump that began in the second half of last year, driven by sustained growth in the IT sector and particularly in the semiconductor industry, coupled with robust export performance. However, tumbling construction investment continues to weigh on the economy, as weakness in the building construction sector outweighs a modest recovery in civil construction. Exports continue to surge, however, led by semiconductors. But the pace of this growth appears to be tapering off, reflecting the impact of the base effect of the stupendous growth rates recorded at the end of last year.

Keywords: macroeconomic outlook, projections and forecasts, industrial economy, Korean economy, key economic indicators, production, exports, imports, investment, South Korea, KIET

JEL Classification: E60, E66