In the image
Lotus pattern decorating window frames in Gwangheungsa Temple, South Korea [Robert at Picasa]
EXECUTIVE SUMMARY
South Korea presents a solid yet complex investment environment, combining strong innovation capacity and policy stability with structural vulnerabilities that temper long-term growth. Economic performance is expected to slow to a growth of 0.9% in 2025 amid weak domestic demand, political uncertainty, and global trade pressures, before recovering gradually with a growth of 1.8% in 2026 and 2.1% in 2027. A strong trade surplus and advanced export industries, particularly in semiconductors and shipbuilding, provide resilience, though energy import dependence and exposure to Chinese competition remain persistent constraints.
Politically, the restoration of institutional legitimacy following the 2024 constitutional crisis has strengthened policy continuity under President Lee Jae-myung’s administration. Governance predictability has improved, yet deep-rooted polarization and chaebol influence limit the depth of reform. Demographic contraction, with the lowest fertility rate in the world and an aging population set to double its dependency ratio by 2035, poses long-term fiscal and labor challenges. Regionally, stable inter-Korean relations and coordination with the United States reduce near-term security risks.
Technological and energy prospects remain strong drivers of ROK’s competitiveness. Rapid advances in AI, robotics, and defense technology, alongside a growing share of low-emission energy generation expected to exceed 70% by the early 2030s, reinforce the country’s innovation edge. However, reliance on imported energy and critical minerals from China constrains full strategic autonomy.