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

Key Chapter Title List

1. Recent Domestic Economic Trends
2. Background of the Outlook
3. 2025 South Korea Economic Outlook
4. Implications
5. Entering a Period 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. Decrease 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 US market are driving continuous export growth, factors such as high interest rates, high prices, and stagnant income are causing persistent sluggishness in consumption, 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 core 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 key dimensions including consumption, equipment investment, construction, exports, employment, prices, and market sentiment: Consumption continues to stagnate, with retail sales declining both year-on-year and month-on-month in July; equipment investment shows divergence between ICT and non-ICT sectors, with non-ICT investment becoming the main driving force; although construction completion data remains weak, order volume has increased for two consecutive months; exports have maintained growth for seven consecutive months, but polarization between product categories is evident; the overall unemployment rate in the job market has improved, but youth employment and employment in the manufacturing and construction sectors face severe challenges; the consumer price inflation rate met the Bank of Korea's stable target of 2.0% in August, with inflationary pressures showing divergence between supply and demand sides.

In the background section of the outlook, the report analyzes the overall trend of gradual improvement in the global economy, discussing growth differences 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 stagnation.

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 procurement conditions and the recovery of the ICT industry; the pace of construction investment recovery will be constrained by factors such as reductions in SOC budgets; export growth will slow down due to base effects but will remain positive; prices will maintain a stable downward trend; and the unemployment rate in the job market will slightly decline, but the scale of new job creation will contract.

Finally, the report proposes five key policy implications: Strengthen economic operation monitoring and proactive policy responses to restore domestic demand; prepare in advance to address US trade protectionism and mitigate its negative impact 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; and strengthen the social safety net to protect the interests of vulnerable groups such as youth and low-income populations.