◇ State of emergency and presidential impeachment crisis lead to economic downturn
President Yoon Suk-yeol declared a state of emergency on the night of Dec. 3. Six hours later, around 4:26 a.m. on the 4th, the state of emergency was lifted. The National Assembly pushed for President Yoon's impeachment, holding him accountable for the declaration of emergency and the disruption of the constitution. In a second vote on Dec. 14, the impeachment motion passed with support from members of the People Power Party. The domestic economy wobbled under the end-of-year state of emergency and impeachment climate. The stock market saw foreign investors continue their selling spree, causing the market capitalization to evaporate by over 100 trillion won just four days into the emergency. In the foreign exchange market, the won-dollar exchange rate exceeded 1,450 won for the first time since the financial crisis. Business meetings with foreign companies have been canceled, and the restraint on corporate and public sector gatherings has deepened the consumption recession.
◇ Exchange rate penetrated… Uncertainty expands due to deteriorating domestic and international economic environments
On Dec. 27, the won-dollar exchange rate surpassed 1,480 won. This is the first time in 15 years since the financial crisis in 2009. Analysts suggest that the decision by the U.S. Federal Reserve to lower interest rates, combined with South Korea's uncertain political situation, led to the high exchange rate. Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok noted that the surge in the exchange rate was "half due to political events and the other half due to a strong dollar." With domestic political leadership damaged by the end-of-year emergency and impeachment, there are predictions that trade pressures from the second term of the Trump administration will intensify. Amid a slowdown in export growth, which has driven South Korea's economy this year, concerns have arisen about a potential cliff in exports.
◇ South Korean stock market ranks last globally, excluding war-torn Russia
This year, the performance of the domestic stock market has been devastating. As of the 24th, the year-to-date decline was 8% for the Korea Composite Stock Price Index (KOSPI) and 22% for the KOSDAQ. In contrast, major Asian stock indexes in Taiwan, Japan, and China recorded double-digit increases, with South Korea's stock index barely surpassing Russia, which is in the midst of war. If the current KOSPI level continues until the end of the year, it will mark the longest consecutive decline since 2008, when the global financial crisis unfolded. Domestic investors have opted for investment immigration, with U.S. stock holdings surpassing $100 billion (about 1,450 trillion won) for the first time in history.
◇ Fires at battery factories and wrong-way driving at city hall station… series of incidents occurs
In June, a fire broke out at the lithium battery company Aercell in Hwaseong, resulting in 23 fatalities. There were no sprinklers installed in the area where the fire occurred. The emergency exit door was supposed to open in the direction of evacuation but was actually designed to open in the opposite direction. Additionally, there were no gas detection or alarm devices installed in places where flammable liquids could generate vapors.
In July, a Genesis G80 car driven by a man in his late 60s went approximately 200 meters in the wrong direction on a one-way four-lane road near City Hall Station in Seoul before crashing onto the sidewalk. The accident resulted in eight deaths and seven serious injuries. The driver claimed sudden acceleration; however, CCTV and dashcam footage showed that the brakes were not activated. An investigation of the event data recorder (EDR) revealed that the driver had likely applied 'full throttle'.
◇ Summer heat waves and tropical nights, winter heavy snowfall… records of extreme weather broken
This year, the Korean Peninsula suffered from extreme weather. From June to August, the average temperature across the country was 25.6℃, the highest since 1973. In Seoul, temperatures did not drop below 25℃ starting from the night of June 21. This marked the earliest occurrence of tropical nights since meteorological observations began in 1907. Heavy rainfall also followed, with 78.8% (474.8㎜) of the total rainfall during the summer concentrated in the monsoon season, the highest ratio since 1973. Additionally, heavy snowfall fell during winter, with a recorded snowfall of 16.5㎝ at the Seoul Meteorological Observatory in Jongno-gu on Nov. 27 at 7 a.m. This was the highest amount of snow recorded for November in 117 years since modern meteorological observations began in 1907.
◇ Struggling steel and petrochemical industries due to pressure from China
The South Korean steel and petrochemical industries have suffered their worst year yet due to the low-price offensive from China. Chinese steel prices are about 20% cheaper than Korean products, and with China significantly expanding its ethylene production, a key ingredient for petrochemical products, a supply surplus has emerged. With the influx of low-priced Chinese products, domestic steel companies have seen their operating profits drop by several dozen percent compared to the previous year, while the performance of petrochemical firms has also declined significantly. In response, the government is pushing for anti-dumping tariffs and support for business restructuring to assist these industries.
◇ Government cuts R&D budget… startup innovation power declines
This year, the large-scale research and development (R&D) budget cut, the first in 33 years as decided by the government last year, has progressed, leading to most research funding at universities and government research institutions being reduced by more than 10%. As a result, some research projects have been suspended, and manpower has been lost, creating research gaps. Research Institute personnel have expressed concerns about job insecurity and research stress. The reduction in government R&D support has particularly hurt the startup ecosystem, as the budget for the 'TIPS' program, which provides between 500 million to 1.5 billion won in R&D funds to promising startups, has been cut by about 20%, stifling the technology innovation and growth potential of these startups.
◇ Struggles of Samsung Electronics in semiconductors unprepared for the future
Samsung Electronics has faced a critical crisis in its semiconductor (DS) division, which is akin to the backbone of the company, particularly in the core memory semiconductor business. It allowed SK Hynix to surpass it in the advanced DRAM process, a year ahead of its own timeline. Additionally, it is now in a position of having to catch up to competitors in the emerging high bandwidth memory (HBM) sector. Samsung Electronics still faces challenges in securing global customers in the HBM sector, and its foundry (semiconductor contract manufacturing) and system LSI businesses are incurring losses, raising questions about the future direction of its operations.
◇ Unresolved conflicts in legislation
The conflict between the medical community and the government intensified in January when the government announced its plan to increase the number of medical school students by 2,000 annually. As a result, residents left hospitals in droves, and medical students submitted leaves of absence in opposition to the government. Although a package of reforms aimed at resolving the shortage of essential medical personnel and regional medical disparities was announced, it has currently lost all momentum. The managerial and personnel crises at major university hospitals, which play a crucial role in regional essential healthcare, have worsened. With all policies stalled due to the state of emergency, it is expected that the conflicts in legislation will continue into the following year.
◇ Increased distrust in online platforms due to Tmemf incident
The unresolved payment issue involving TMON and WEMAKEPRICE (Tmemf) has led to increasing distrust among consumers toward e-commerce and online platforms. Following the incident, several businesses in the e-commerce industry have closed down. After the announcement of the shutdown of 1300K, companies such as Allets and Sajamarket also displayed service termination pop-ups on their websites. Due to this incident, small businesses and small merchants linked to Tmemf have faced cash flow difficulties as they have not received their payments on time. The financial damage from the Tmemf incident is estimated to reach 1.5 trillion won, affecting over 48,000 businesses. Consumer grievances remain unresolved, particularly among the travel industry, which has expressed dissatisfaction with consumer advocacy groups' recommendations for compensation.
◇ Rising construction costs, including labor, increase apartment prices by 90 million won in a year
The sale price of apartments, particularly the 84㎡ units known as 'people's size,' has surged. According to Real Estate R114 and the promotional company The PR, the average sale price per 3.3㎡ of private apartments across the country has been recorded at 2.065 million won, marking an increase of 265,000 won (14.7%) compared to last year's average price of 1.8 million won. In terms of the 84㎡ area, this translates to a rise of 90.1 million won. The primary reason for the price increase is cited as the rise in construction and labor costs. The national construction cost index provided by the Korea Construction Technology Institute reached 130.45 as of September, the highest level since the index was first provided on a monthly basis.
◇ North Korea's deployment in Ukraine escalates Russia-Ukraine war into an international conflict
North Korean troops have been deployed and are reportedly suffering casualties in the Ukraine-Russia war. On Dec. 23 (local time), Ukrainian President Volodymyr Zelenskyy announced that over 3,000 North Korean soldiers had fallen in southwestern Russia's Kursk region, which is nearly three times the figure released by South Korea's Joint Chiefs of Staff. Videos show soldiers believed to be North Koreans being pursued by drones on an open field without cover, and counterfeit identification documents were discovered from deceased soldiers presumed to be North Korean. Meanwhile, The New York Times (NYT) reported, citing U.S. intelligence sources, that contrary to claims of Russia requesting troop deployments from North Korea due to manpower shortages, the deployment of North Korean troops to Ukraine was conducted at North Korea's request, which was immediately accepted by President Vladimir Putin.