Exports, the engine of South Korea’s economy, are also losing momentum. Export growth is expected to fall sharply from 6.9% in 2024 to 1.8% in 2025 amid a deteriorating global trade environment. While the semiconductor sector maintains some positive momentum, global trade forecasts for semiconductors in 2025 have been revised downward — from 25.2% to 13.4% — dampening hopes for a strong rebound.
Adding to the economic headwinds, oil prices remain steady around $75 per barrel, and the Korean won shows little fluctuation. Although the current account surplus is still substantial at around $90 billion, it marks a decline from $99 billion the previous year.
Inflation is projected to ease from 2.3% to 1.6%, reflecting the weak domestic demand. Meanwhile, the unemployment rate is expected to edge up slightly to 2.9% from 2.8%, with job creation slowing to 100,000 new jobs, down from 160,000 in the previous year. This points to a shrinking working-age population and lingering demand-side weakness.
Compounding economic concerns is an escalating political crisis. South Korea’s top economic policymakers have tendered their resignations at a critical moment for trade negotiations with the United States.
Prime Minister Han Duck-soo, serving in a caretaker capacity, announced his resignation on May 1 to prepare for a presidential bid. Simultaneously, Deputy Prime Minister and Finance Minister Choi Sang-mok, expected to assume Han’s role, also resigned, just before the opposition filed a motion to impeach him.