The government has recently diagnosed that the economic downturn pressure is increasing for the Korean economy. The report titled “Recent Economic Trends of January 2025” (Green Book) suggests that the economy is showing signs of recession, removing the word “concern” from their previous month’s report which hinted at an increased risk of downturn. Factors such as the frozen domestic market due to the impeachment political turmoil and the approaching second term of Donald Trump’s government, contributing to uncertainty in exports, seem to have influenced this outlook.
This report marks the first time since January of the previous year that there is mention of concerns over employment slowdown. The Ministry of Economy and Finance noted that the economy is facing a downturn due to the heightened domestic and international uncertainties, affecting economic sentiment and causing employment to slow down.
Indicators from December showed a decrease in overall industrial activity, with mining and manufacturing declining while electricity and gas industries showed growth. Service production, led by finance and insurance, also fell, recording a 0.2% decrease. Although retail sales increased, facility investment and construction investment decreased simultaneously. While durable and non-durable goods sales fell, semi-durable goods increased by 4.1%, leading to a 0.4% rise in retail sales compared to the previous month. However, the political situation from last December is expected to have negatively impacted consumer sentiment, suggesting a potential decline in retail sales.
The ministry pointed out that while there are positive factors like the rise in credit card approvals, domestic passenger car sales, and department store sales, negative factors such as declining supermarket sales could offset these. Equipment investment decreased by 1.6% compared to the previous month due to reduced machinery orders, though favorable machinery imports indicate a positive future influence. Construction investment also declined by 0.2% due to the recession in the construction sector.
Exports in December 2024 increased by 6.6% year-on-year, achieving the largest annual export record, with daily average exports increasing by 4.3% year-on-year. Despite previous robust employment trends, there was a decrease in employment by 52,000 compared to the previous year, with the unemployment rate rising by 0.5 percentage points in December.
Globally, although there is a general recovery, persistent geopolitical risks and potential changes in the trading environment continue to grow uncertainties. The Ministry of Economy and Finance emphasized that they would work collaboratively with related agencies using the economic relations ministerial meeting as a control tower to implement economic policies swiftly for stable economic management in 2025.