 Korean Economic Outlook for the Second Half of 2025Sora Lee
No 17, Industrial Economic Review from Korea Institute for Industrial Economics and Trade Abstract: In South Korea, the domestic real economy is showing weakness in exports, investment, and consumption, constraining economic growth. Exports have slipped due to price declines in semiconductors, automobiles, and petroleum products, as well as slack global demand and policy uncertainties in major economies. Semiconductors have been severely affected by falling unit prices, and overseas demand for South Korean autos has slowed. These conditions, in addition to the base effect of strong export performance in the previous year, conspired to produce a negative growth rate (-2.1 percent) in exports in the first half (H1) of 2025. This is the first time exports have actually fallen since the third quarter (Q3) of 2023. Private consumption has slowed too across both goods and services, with the exception of consumption of some durable goods, such as automobiles. Domestic political uncertainties, an inflationary environment, and high interest rates have all worked to dampen consumer sentiment, resulting in overall sluggish domestic demand. Facility investments have also tumbled, especially investments in chip manufacturing equipment. Construction investment continued its freefall, recording its fourth consecutive quarterly decline. At the same time, industrial production has shown some signs of recovery. After significant volatility in H2 of last year, manufacturing production began to tick back upward starting in February 2025. Service sector output has also climbed, albeit modestly, since the beginning of this year. However, key indicators used to assess economic conditions remain unstable. The cyclical component of the leading index temporarily rebounded after February 2025 but has recently reverted to a downward trend. Also, the cyclical component of coincident index continues to decline with no clear signs of a rebound since last year. Despite a modest recovery in production, continued contractions in exports, consumption, and investment, along with heightened uncertainty in key economic sectors, are expected to significantly hamper domestic growth in the near term. Keywords: economic outlook; macroeconomic outlook; economic forecasting; marcoeconomy; macroeconomic forecasti (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:kieter:021416 Access Statistics for this paper More papers in Industrial Economic Review from Korea Institute for Industrial Economics and Trade Sejong National Research Complex, Korea Institute for Industrial Economics and Trade, 370 Sicheong Dae-ro C-dong 8-12F 30147, Republic of Korea. Contact information at EDIRC. |
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