South Korea’s Economy Stalls as Political Uncertainty Looms


Last updated: January 27, 2025

South Korea’s economic engine barely turned over last quarter, expanding by just 0.1%, according to the Bank of Korea.

The sluggish figure fell short of forecasts, underscoring the growing strain on Asia’s fourth-largest economy, already reeling from domestic political upheaval and looming trade tensions with the U.S.

For 2024, annual growth reached 2%, slightly below projections of 2.1%. The December quarter highlighted faltering consumer confidence and cautious investment, reflecting President Yoon Suk Yeol’s abrupt martial law declaration and concerns over potential trade tariffs from Donald Trump’s administration.

Yoon’s controversial decree, issued on December 3, sparked market turbulence, with the won tumbling and public confidence eroding. Though quickly revoked, it led to his impeachment and arrest—the first for a sitting South Korean president.

The fallout continues to overshadow efforts by businesses and policymakers to steady the economy.

The report revealed weakening private consumption, which grew just 0.2%, and a sharp decline in construction investment.

Exports rose 0.3%, driven by semiconductors, while investments in chip-making equipment and other machinery showed modest growth at 1.6%.

South Korea’s export-dependent economy, where semiconductors play a central role, has felt the pinch of softer global demand for memory chips.

Meanwhile, potential U.S. trade tariffs could deliver a double blow—reducing direct exports to the U.S. and disrupting supply chains reliant on Korean components.

In response, Seoul is exploring ways to strengthen trade ties with the U.S., including increased energy and food imports.

Domestically, acting President and Finance Minister Choi Sang-mok has vowed to ramp up fiscal spending to bolster consumer and business confidence.

Measures include a one-off holiday in January and discussions on an extra budget to support economic growth.

Bank of Korea Governor Rhee Chang-yong emphasized the need for swift government action, suggesting fiscal measures are essential to complement monetary policy.

The central bank recently kept its benchmark interest rate at 3%, after two cuts late last year, while signaling potential reductions in the months ahead.

Consumer sentiment remains fragile, with the latest index reading at 91.2, reflecting lingering uncertainty amid South Korea’s leadership vacuum.

“The numbers reflect weakened investment and consumer sentiment as South Korea faces uncertainties from home and abroad,” said Lee Seung-suk, a researcher at the Korea Economic Research Institute.

As the leadership vacuum persists, South Korea’s policymakers face the challenge of navigating global trade headwinds and restoring confidence in the country’s political and economic stability.

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Venture Smarter | South Korea’s Economy Stalls as Political Uncertainty Looms
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Jon Morgan, MBA, LLM, has over ten years of experience growing startups and currently serves as CEO and Editor-in-Chief of Venture Smarter. Educated at UC Davis and Harvard, he offers deeply informed guidance. Beyond work, he enjoys spending time with family, his poodle Sophie, and learning Spanish.
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Venture Smarter | South Korea’s Economy Stalls as Political Uncertainty Looms
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LJ Viveros has 40 years of experience in founding and scaling businesses, including a significant sale to Logitech. He has led Market Solutions LLC since 1999, focusing on strategic transitions for global brands. A graduate of Saint Mary’s College in Communications, LJ is also a distinguished Matsushita Executive alumnus.
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