South Korea's Economic Outlook for the Year: Balanced Growth Between Domestic and Foreign Demand

List of Key Chapter Titles

1. Recent Domestic Economic Trends
2. Background of the Outlook
3. 2025 South Korean Economic Outlook
4. Implications
5. Entering a Phase of Consumption Stagnation
6. Expansion of Non-ICT Equipment Investment
7. Construction Orders Rebound Amid Sluggish Construction Completion
8. Sustained Export Growth Centered on Specific Items
9. Reduction in Quality Jobs Despite Superficial Labor Market Improvement
10. Consumer Price Inflation Rate Reaches Bank of Korea's Target of 2.0%
11. Deterioration in Private Sector Sentiment
12. Global Economy: Gradual Improvement

Document Introduction

The current South Korean economy exhibits a divergent trend of export recovery coexisting with weak domestic demand. Although semiconductor exports are recovering and favorable conditions in the U.S. market are driving continuous export growth, factors such as high interest rates, high prices, and stagnant income are leading to persistent consumption weakness, posing challenges to the recovery of domestic demand. Based on data from authoritative institutions such as the Bank of Korea, Statistics Korea, and the Korea International Trade Association, this report systematically analyzes the operational dynamics of key sectors in the South Korean economy since 2024, providing a professional forecast for the 2025 economic trajectory.

The report first outlines recent domestic economic trends, providing a detailed analysis of performance across key dimensions: consumption, equipment investment, construction, exports, employment, prices, and market sentiment. On the consumption front, stagnation persists, with retail sales in July declining both year-on-year and month-on-month. Equipment investment shows a divergence between ICT and non-ICT sectors, with non-ICT investment becoming the main driving force. In the construction sector, while completion data remains weak, order volume has grown for two consecutive months. Exports have maintained growth for seven consecutive months, but there is a clear polarization among different items. The overall unemployment rate in the job market has improved, but youth employment and employment in the manufacturing and construction sectors face severe challenges. In August, the consumer price inflation rate met the Bank of Korea's stability target of 2.0%, with inflationary pressures showing divergence between supply and demand sides.

In the section on the background of the outlook, the report analyzes the overall trend of gradual improvement in the global economy, discussing growth disparities between advanced and emerging economies, as well as the opportunities and risks facing global trade. It also points out that the South Korean economy has reached a critical turning point, and its future growth trajectory will be significantly influenced by changes in the export environment and the direction of monetary policy, with possibilities ranging from a "U"-shaped recovery to continued sluggishness.

Based on the above analysis, the report provides a comprehensive outlook for the South Korean economy in 2025, projecting an annual economic growth rate of 2.2%, with relatively stable trends in the first and second halves of the year. Specifically, private consumption is expected to experience a moderate recovery as interest rates decline and disposable income expands. Equipment investment will continue to recover, benefiting from improved capital-raising conditions and a rebound in the ICT industry. The pace of recovery in construction investment will be constrained by factors such as reduced SOC budgets. Export growth will slow down due to base effects but will remain positive. Prices will maintain a stable downward trend. The unemployment rate in the job market will decline slightly, but the scale of new job creation will contract.

Finally, the report proposes five major policy implications: Strengthen economic operation monitoring and proactive policy responses to restore domestic demand; Prepare in advance to address U.S. trade protectionism to mitigate negative impacts on exports and industries; Continuously optimize the investment environment to enhance long-term growth potential and job creation capacity; Build an export safety net to hedge against risks from fluctuations in major economies; Strengthen the social safety net to protect the interests of vulnerable groups such as youth and low-income populations.