Korea’s economy is rebounding with strategic policies post-election. AMRO’s visit highlighted recovery, addressing housing issues, and promoting long-term resilience through diversification and demographic strategies for sustained growth.
Economic Resilience and Outlook
Korea’s economy is on an upward trajectory following the recent presidential elections, supported by strategic fiscal and monetary policies. The ASEAN+3 Macroeconomic Research Office (AMRO) highlighted this recovery during their visit in December 2025. Discussions led by lead economist Kian Heng Peh emphasized Korea’s projected GDP growth of 1.0% for 2025 and 1.9% for 2026, alongside stable inflation rates and controlled food prices, despite some increases in service costs.
External and Domestic Dynamics
The country’s external sector remains robust, particularly driven by semiconductor exports benefiting from the AI boom, resulting in a current account surplus. Although the won has depreciated due to capital outflows, substantial foreign reserves provide stability. The government’s strategies to support small businesses, in light of high fiscal deficits, aim to foster domestic demand. Rising housing costs in Seoul necessitate targeted interventions, while the Bank of Korea’s rate cuts through 2025 reflect a measured response to ongoing challenges.
Policy Recommendations
AMRO recommends that Korea maintain a balanced approach to recovery, focusing on fiscal sustainability and structural reforms. It emphasizes the need for adjustments in the housing market, advocating for greenbelt development and effective policy changes. Additionally, increasing labor participation through demographic reforms and immigration is vital. Enhancing Korea’s semiconductor strategy for comprehensive capabilities is essential for durable industrial growth and supply chain resilience. AMRO appreciates Korea’s openness in discussions during the mission.
Source : Korea: Strengthening Resilience and Steering Through Geoeconomic Challenges