New Year's Prospects for the Korean Economy

The following is an annual column written by the president of the Korea Institute for Industrial Economics and Trade. With the arrival of the Year of the Blue Dragon, I am privileged to extend my greetings to the readers and supporters of i-KIET Issues & Analysis as we usher in the new year. Reflecting on the year gone by, 2023 presented formidable challenges to our economy, marked by a downturn that commenced in the latter part of 2022 and that culminated in a recession during the first half of 2023. Despite a modest resurgence in the second half of the year, 2023 was overall characterized by weak economic performance. Factors such as languid export momentum due to the global recession, the decline in the semiconductor industry, and a smaller-than-expected rebound in China persisted until the third quarter. Moreover, high inflation and interest rates dampened domestic demand. The end result was a growth rate just half of the one the country posted in 2022. As we look ahead to 2024, economic uncertainties linger, with major global and domestic risks weighing on the economy. Of paramount concern are the ongoing geopolitical tensions, epitomized by two major ongoing wars that have cast a pall over the global economy. This geopolitical situation is compounded by persistently high inflation and interest rates, which are not likely to fall anytime soon and should continue to retard global economic growth. Nevertheless, amid these challenges, our economy in 2024 is projected to beat 2023’s performance, fueled largely by a surge in exports owing to a rallying semiconductor industry. However, enduring geopolitical uncertainties and slack domestic demand hampered by worsening financial conditions may exert downward pressure on growth. Internal and external factors pose substantial challenges to Korea achieving a robust recovery and sustainable economic growth. To address these challenges, our institution remains steadfastly committed to meticulously analyzing current issues in the real economy and formulating policies. We pledge our unwavering commitment to revitalizing the domestic economy and fostering an industrial resurgence. In this new year, we will strive to augment our capacity and serve as a pivotal think tank driving industrial development in Korea. May the new year bring prosperity to your homes and workplaces. Ju Hyeon, President Korea Institute for Industrial Economics and Trade