New Year's Prospects for the Korean Economy (2023)

At the outset of 2022, the South Korean economy sought to start anew, aiming to finally surmount the hurdles of COVID-19. Unfortunately, however, the economy is now confronted with an unprecedented level of uncertainty, as one unforeseen risk after another emerged over the course of 2022. These risks include the Russian invasion of Ukraine, the abrupt turn in US monetary policy, China’s only recently-abandoned zero-COVID-19 policy and draconian lockdowns, the intensifying conflict over economic hegemony between the world’s great powers, and the growing financial insecurity of emerging economies. The Korean economy has thus been seeing clear signs of slowdown since late 2022, especially in the manufacturing sector. The extreme difficulties posed by external factors compound the many domestic problems Korea has yet to tackle, and in addressing both the Korean economy is now confronting a distinct new challenge. This analytical brief summarizes the challenges ahead for Korea and the world in 2023.