[editor's note] At the end of 2024, uncertainty in domestic politics increased due to martial law and impeachment. In the midst of this, the Trump 2nd administration will be inaugurated on Jan. 20 of the new year. The return of Donald Trump, the U.S. president who disregarded existing international trade principles and proposed 'new norms,' is a factor that heightens the uncertainty for South Korea, a leading export nation. The reality of South Korea in 2025 is summarized as 'internal strife and external threats.' How will we navigate through this crisis? We have gathered the outlook and suggestions on the South Korean economy from 34 domestic economic experts.
Economic experts have suggested that the current government's stringent fiscal management approach, which emphasized fiscal austerity, should transition to an 'expansionary' method. Considering that a historically unprecedented 'reduced budget' has been set, many agreed on the necessity to promptly move towards drafting a supplementary budget.
However, there was a predominant view that such an active fiscal operation should not be utilized for universal basic income or local currency policies. It was pointed out that with local currencies, the benefits are concentrated on the middle class rather than the vulnerable groups who urgently need support.
“Tight until now... from this year, should operate an expansionary fiscal policy”
According to the results of the '2025 Economic Outlook Survey' conducted by CHOSUNBIZ on Jan. 1 targeting 34 domestic economic experts, over half (55.9%) indicated that the government's fiscal policy direction this year should focus on 'expansionary fiscal operation to counter economic slowdown.'
Following that, many respondents selected 'neutral fiscal adjustment to boost the economy while minimizing fiscal soundness deterioration' (35.3%), whereas 'tight budget formation to secure fiscal soundness' (5.9%) saw fewer responses.
This is understood to be based on the evaluation that the current government's fiscal policies were overly tight, resulting in significant side effects. In assessing the fiscal policies pursued by this government, the most selected response was 'tight fiscal operation that limited expenditure compared to fiscal demands' (47.1%).
The next most common answer was 'expansionary fiscal operation that failed to reduce fiscal expenditure relative to revenue' (26.5%), criticizing the two consecutive years of large-scale revenue shortfalls disrupting fiscal management. The leading causes of revenue shortfall were cited as 'corporate performance decline due to economic slowdown' (73.5% of respondents, multiple answers allowed) and 'optimistic revenue forecasts' (58.8%).
Only 17.6% evaluated it as 'a sound fiscal management that prevented the deterioration of fiscal soundness' as was the government's original intention.
Experts agree on the need to review a supplementary budget this year
Experts unanimously agreed on the need to consider drafting a supplementary budget this year. The highest number of respondents (59.4%) believed action should commence 'as soon as possible,' while others (31.3%) indicated that though it is necessary, it is not yet urgent. Opinions that 'a supplementary budget is unnecessary' (9.4%) were the fewest.
The predominant reason cited was the need to compensate for the unprecedented 'reduced' budget draft this year amidst severe domestic demand downturn. Yoon Sang-ha, International Macroeconomics Team Head at the Korea Institute for International Economic Policy, said, “While domestic demand slump continues for a prolonged period, the government's efforts to defend the economy are lacking.” An anonymous securities industry official noted, “With the inevitable sluggishness in the foreign sector, recovery of domestic demand through a supplementary budget is key to achieving an economic growth rate in the high 1% range.”
Those who believe that a supplementary budget is necessary but timing should be carefully considered, seem to factor in the political scene. Regarding the appropriate time for supplementary budget discussions, over half of the responses considered the political schedule post-impeachment, paying attention to proposals like 'after forming a conference between ruling and opposition parties' (30%), 'after the Constitutional Court's impeachment decision' (13.3%), and 'post-presidential election when the new government is inaugurated' (10%).
Overwhelming 'opposition' to universal basic income... opposition outweighs support for local currency
While experts support the active role of fiscal measures such as expansionary fiscal operation or supplementary budget formation, they held a negative stance toward the universal basic income or local currency policies promoted by the opposition parties. Only 2 experts (6.1%) expressed support for granting universal basic income to stimulate consumption, with the vast majority (93.9%) opposing it.
The most common reason for opposition was 'the need for focused support on vulnerable groups rather than universal aid' (71%, multiple responses). Other reasons included 'the limited economic stimulus effect of the aid' (35.5%) and 'deterioration of fiscal soundness due to excessive fiscal expenditure' (16.1%). Meanwhile, the two supporters cited 'stimulating consumption' and 'mutual benefits for small business owners and local markets' as their reasons.
In the case of the local currency policy strongly pushed by Lee Jae-myung, head of the Democratic Party of Korea, opinions were divided, with 'opposition' (54.5%) being slightly more prevalent. However, among the supporters, all responses were conditional, stating support 'for limited issuance under restricted fiscal expenditure' (39.4%) or 'within certain amounts' (3%). No experts unconditionally supported it.
Those opposing the local currency policy most commonly argued that 'benefits are concentrated on specific classes and led to wasteful use of taxpayer money' (33.3%). The notion is that the middle class and above, rather than low-income or vulnerable groups, mostly purchase local currencies, concentrating benefits like discounts on them. Responses arguing 'it is ineffective' also accounted for 20.6%. Those conditionally in favor answered that 'it should be adopted to stimulate consumption without burdening finances' (24.2%).
Participants in the survey
Kang Min-joo, ING Bank Sector Head, Kang Sung-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-hoon, Head of the Research Division at KB Securities, Kim Sung-hyun, Sungkyunkwan University Professor, Kim Seung-hyun, Head of the Research Center at Yuanta Securities, Kim Ji-yeon, Head of Forecasting at Korea Development Institute, Kim Jin-il, Korea University Professor, Kim Hak-kyun, Head of the Research Center at Shin Young Securities, Kim Hyun-soo, Economic Policy Team Leader at the Korea Chamber of Commerce and Industry, Park Sun-young, Dongguk University Professor, Park Hee-chan, Head of the Research Center at Mirae Asset Securities, Baek In-seok, Senior Research Fellow at the Capital Market Institute, Suk Byung-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, Head of the Research Division at Hanwha Investment & Securities, Yoon Sang-ha, International Macroeconomics Team Head at the Korea Institute for International Economic Policy, Lee Geun, Seoul National University Professor, Lee Byeong-geon, Head of the Research Center at DB Financial Investment, Lee Seung-woo, Head of the Research Center at Eugene Investment & Securities, Lee Seung-hoon, Economist at Meritz Securities, Lee Jong-hwa, Korea University Professor, Jun Kwang-woo, Chairman of the Institute for Global Economics, Jeong Young-sik, Head of the International Macroeconomic Finance Office at the Korea Institute for International Economic Policy, Cho Kyung-yeop, Senior Research Fellow at the Korea Economic Research Institute, Cho Jang-ok, Honorary Professor at Sogang University, Joo Won, Head of the Economic Research Department at Hyundai Research Institute, Hur Joon-young, Sogang University Professor, Hong Ki-seok, Ewha Womans University Professor, Hwang Seung-taek, Head of the Research Center at Hana Securities