[Editor's note] Political uncertainty in South Korea has increased toward the end of 2024 amid the state of emergency and impeachment proceedings. In this context, Trump’s second administration will commence on Jan. 20. The return of U.S. President Donald Trump, who disregarded existing international trade principles and introduced 'new norms,' poses a factor of uncertainty for South Korea, a major exporting country. This is the 'internal and external challenges' facing South Korea in 2025, the year of 'Eulsa.' However, for South Korea, which has grown by overcoming national crises, a crisis is just another expression of opportunity. “A crisis is the perfect opportunity for advancement,” said the so-called management god, Matsushita Konosuke. How will South Korea navigate the crisis at hand? We have presented the prospects and recommendations of 34 domestic economic experts.
More than 85% of the 34 domestic economic experts, specifically 29 individuals, predict that South Korea's economic growth rate will not exceed 2% next year. They believe that the growth of the Korean economy in 2024, driven by exports, has entered a period of stagnation due to slow growth, amid sluggish domestic demand caused by consumer stagnation.
Specifically, 12 of the 34 experts anticipate that next year's economic growth rate will be lower than the Bank of Korea's estimated potential growth rate of 1.8%. The potential growth rate refers to the maximum GDP increase that can be achieved by fully utilizing a country's labor, capital, and resources without causing side effects such as inflation. An economic growth rate lower than the potential growth rate indicates a transition into a low-growth phase.
South Korea is facing deteriorating productivity and a decrease in human resources due to low birth rates and a rapidly aging population. In advanced industries such as artificial intelligence (AI), the technological gap is widening, and key industries like semiconductors are being rapidly caught up by latecomers. In areas such as autos and steel, where competitiveness is maintained, it is difficult to predict how the Trump-induced changes in trade order will unfold and what variables will arise.
◇ 29 out of 34 experts expect South Korea's growth rate to be below 2% in 2025
In a survey conducted by CHOSUNBIZ among 34 domestic economic experts, half of the respondents, or 17 experts, projected South Korea's economic growth rate for 2025 to be '1.7% or more~below 2.0%.' This is consistent with the Bank of Korea's growth forecast of 1.9% announced last November.
While most experts predicted the growth rate for 2025 to be in the high 1% range, there were also quite a few who forecasted it would be in the mid-1% range. Among respondents, 10 individuals (29.4%) predicted '1.3% or more~below 1.7%.' There were also one expert each predicting '1% or more~below 1.3%' and 'below 1%.'
There were also five experts predicting a growth rate of '2.0% or more~below 2.3%.' No experts forecasted growth of 2.3% or more.
Experts identified 'political uncertainty' as the primary factor causing low growth in 2025. They reasoned that political uncertainty amplifies the anticipated 'negative growth factors' of sluggish domestic demand, weakened competitiveness in core industries, and decreased exports due to the inauguration of Trump's second term.
Woo Seok-jin, a professor of economics at Myongji University, noted, “The growth forecasts by domestic think tanks, including the Bank of Korea, assumed that the impact of low growth would occur in mid to late 2025, which is an optimistic assumption. There is a high possibility of a shock occurring in the first half of the year. The question is whether South Korea can appropriately respond to it in a phase of impeachment.”
Nevertheless, there were many optimistic predictions that by 2026, South Korea would somewhat overcome the low-growth phase and recover to a 2% growth rate. Among respondents, 16 individuals (47.1%) predicted that the growth rate in 2026 would maintain a level similar to that of 2025, '1.7% or more~below 2.0%,' while 14 individuals (41.2%) believed that the South Korean economy in 2026 would grow '2.0% or more~below 2.3%' and achieve a higher growth rate than in 2025. Woo Seok-jin, a professor, stated, “If the newly incoming government is progressive, they are expected to boost the growth rate by expanding the role of fiscal policy.”
There were also views that the growth rate in 2026 could be lower than in 2025. Yoon Sang-ha, head of the International Macro Team at the Korea Institute for International Economic Policy, remarked, “Although Donald Trump's term starts in 2025, it will be difficult for the 'America First' trade policy to be implemented immediately in its first year due to external and internal procedural factors. Trump's second administration's trade policies will likely have a global trade impact, negatively affecting the domestic export environment from 2026.”
◇ Is high inflation ending? “Inflation rate in 2025 expected to be lower than in 2024”
Most experts predict that the inflation rate in 2025 will be lower than the 2.3% increase in 2024. Among 34 respondents, 33 foresaw that the inflation rate in 2025 would be below 2.3%. The most common response was '1.7% or more~below 2.0%' with 15 individuals (44.1%), followed by '2.0% or more~below 2.3%' with 13 individuals (38.2%), and '1.3% or more~below 1.7%' with 5 respondents (14.7%). This year’s annual consumer price increase was 2.3%. The only expert predicting a higher inflation rate than this year's forecast '2.3% or more~below 2.7%' was just one person.
Experts predict that as international oil prices fall due to reduced demand factors such as China's economic downturn, the overall trend of slowing inflation will continue. There are also predictions that the inflationary pressure resulting from economic factors will be limited. However, geopolitical risks such as changes in agricultural output due to climate change and Middle East conflicts are seen as factors increasing inflationary uncertainty.
Park Hee-chan, head of the Mirae Asset Research Center, noted, “With the domestic market situation being unfavorable, the Bank of Korea maintains its high-interest rate policy. Even though rates have been continuously lowered recently, the positive market effects of interest cuts are not yet apparent.” Park added, “Last month, the core inflation rate fell to 1.9%, and it is expected to decline to the mid-1% range as trends continue. It is also predicted that international oil prices will not rise significantly for the time being due to supply factors rather than demand factors.”
However, there are also concerns that the recent surge in the won-dollar exchange rate due to domestic political instability is becoming an inflationary risk. Woo Seok-jin remarked, “Normally, the inflation rate should fall below 2% next year, but due to the exchange rate, it is difficult for the inflation rate to drop below the 2% range.”
Park also said, “The prediction of the inflation rate falling to the mid-1% range was based on the assumption that the exchange rate would remain below the 1,400 won level. If the current exchange rate trends continue, the existing forecasts might need to be revised upwards.” He further explained, “There is an analysis suggesting that a 10% increase in the exchange rate generally affects prices by 1 percentage point. Although a price increase due to exchange rate rise may reduce demand, making prices less likely to rise, it is difficult to completely exclude the exchange rate impact.”
◇ South Korea facing 'uncertainty'… how to seek opportunities in crisis
'Uncertainty,' 'political uncertainty,' 'internal and external conflicts,' 'critical juncture,' and 'Trump risk' are the 'key keywords defining the South Korean economy in 2025,' according to economic experts who participated in CHOSUNBIZ's economic outlook.
Among the 34 respondents, 14 mentioned 'uncertainty.' Including responses that specified uncertainty factors such as Trump risk and changes in trade dynamics, the number increased to 20. Other significant areas mentioned were 'digital transformation and AI innovation,' 'Resilience' (recovery and resilience), 'domestic demand,' 'seeking opportunity in crisis,' 'finding growth drivers,' and 'entrenchment of low growth.'
Seok Byeong-hun, a professor in the Department of Economics at Ewha Womans University, stated, “The root of all current problems is the increasing political uncertainty.” He added, “It has further hampered already weak consumer sentiment. There is significant concern that the political uncertainty could delay responses to Trump's second term, potentially leading to export declines.”
Ko Tae-bong, head of research at iM Investment & Securities, commented, “South Korea's economy is being pushed aside as China aggressively pushes back in response to the U.S.-China trade war. Key industries such as steel, petrochemicals, semiconductors, automobiles, and secondary batteries are in precarious positions.” Ko also remarked, “The BRICS and other Global South countries are confronting the U.S. in response to America's tariff war. Like Germany and Japan, which were manufacturing powerhouses, South Korea could face a similar crisis. The year 2025 could mark the beginning of such a crisis.”
Their assessment indicates that domestic political uncertainty is affecting both the macroeconomy and the real economy. The focus of the proposed countermeasures is on crisis management. Economic experts advise meticulous management of foreign exchange risks, external credit status, and capital market volatility. Suggestions also arose about engaging frequently with key figures in Trump’s second administration to reduce external policy uncertainties.
Ko emphasized, “The immediate priority is a rapid response to changes in the trade landscape diplomatically. The current uncertain political situation must be resolved promptly.” Ko added, “A substantial supply of priming water must be provided so that domestic industries can grow. Also, self-imposed growth-restraining 'regulations' must be removed.”
◇ Participants in the survey
△Kang Min-joo, institutional sector head at ING Bank △Kang Seong-jin, Korea University professor △Ko Tae-bong, iM Investment & Securities executive director △Kwak No-sun, Sogang University professor △Kim Sang-bong, Hansung University professor △Kim Sang-hun, KB Securities head of research △Kim Seong-hyeon, Sungkyunkwan University professor △Kim Seung-hyun, Yuanta Securities head of research △Kim Ji-yeon, Korea Development Institute director of projections △Kim Jin-il, Korea University professor △Kim Hak-kyun, Shin Young Securities head of research △Kim Hyun-su, Korea Chamber of Commerce and Industry policy team leader △Park Seon-yeong, Dongguk University professor △Park Hee-chan, Mirae Asset Securities head of research △Baek In-seok, Korea Capital Market Institute senior research fellow △Seok Byeong-hun, Ewha Womans University professor △Shin Kwan-ho, Korea University professor △Woo Seok-jin, Myongji University professor △Yoo Jong-min, Hongik University professor △Yoo Jong-woo, Korea Investment Securities head of research △Yoon Sang-ha, Korea Institute for International Economic Policy international macro department head △Lee Geun, Seoul National University professor △Lee Byung-keun, DB Financial Investment head of research △Lee Seung-woo, Eugene Investment & Securities head of research △Lee Seung-hoon, Meritz Securities economist △Lee Jong-hwa, Korea University professor △Jun Kwang-woo, Institute for Global Economics chairman △Jeong Yeong-sik, Korea Institute for International Economic Policy international macro-finance director △Jo Kyung-yeop, Korea Economic Research Institute senior research fellow △Jo Jang-ok, Sogang University emeritus professor △Joo Won, Hyundai Research Institute economic research director △Heo Jun-young, Sogang University professor △Hong Ki-seok, Ewha Womans University professor △Hwang Seung-taek, Hana Securities head of research among a total of 34 individuals