New Year’s Prospects for the Korean Economy

The Year of the Green Snake has arrived. I would like to start this year by thanking all of you, our readers, for your continued support for i-KIET Issues & Analysis. We at KIET expect the global economy to expand modestly again in 2025, as inflation eases and central banks turn to looser monetary policies favoring growth. But geopolitical uncertainties, volatility in financial markets, and the rising tide of protectionism worldwide present major challenges to the growth of the global economy. The outlook for growth in 2025 looks quite similar to what we just witnessed in 2024. As for South Korea, we expect construction investment to remain sluggish, but solid growth in exports and a slow but certain recovery in private consumption and facility investment should help the Korean economy grow by 2.1 percent. Private consumption is projected to grow by 1.9 percent, thanks to falling interest rates, higher real incomes, and a stabilization in consumer prices. Facility investment is also projected to grow, this time by 2.9 percent, reflecting the strength of the global tech sector and improved performance of leading Korean enterprises. Weak leading indicators of the business cycle in the construction sector are likely to weigh on construction investment, which is set to fall by 0.9 percent. But we expect exports to climb by 2.2 percent, thanks to robust demand for IT products and particularly for semiconductors. Korea’s trade surplus is poised to grow to USD 48.7 billion as a result. The year 2025 marks the start of an age of great global transformation, as nations race to develop and secure the cutting-edge technologies necessary to achieve digital transformation and carbon neutrality. As a leading think tank tasked with developing strategies for fostering new industries and growth, the research faculty at KIET will continue to conduct a wide range of proactive policy studies with a focus on the core issues of this age. We will strive to light the path forward for Korean industries and the Korean economy. I wish happiness and success for all of you in this new year, and I ask you to continue to support our research endeavors as we strive to find and establish effective measures to spark the growth of Korean industries. January 1, 2025 Namhoon KWON President, Korea Institute for Industrial Economics and Trade