In June, industrial production, services production, retail sales, and facilities investment increased, while construction investment decreased. In July, job growth increased and consumer prices growth slightly speeded up. In June, total production fell( down 0.1% m-o-m and up 0.5% y-o-y) , as construction production declined (down 0.3% m-o-m and down 4.6% y-o-y) , while industrial production (up 0.5% m-o-m and up 3.8% y-o-y) and services production (up 0.2% m-o-m and up 0.5% y-o-y) increased. In June, retail sales (up 1.0% m-o-m and down 3.6% y-o-y) and facilities investment (up 4.3% m-o-m and down 2.7% y-o-y) increased, while construction investment (down 0.3% m-o-m and down 4.6% y-o-y) decreased. In July, exports grew by 13.9 percent from a year ago, driven by increased exports of the IT sector including semiconductors. The daily average of exports increased by 7.1 percent from a year ago. In July, the Consumer Sentiment Index (CSI) rose by 2.7 points to 103.6 month-on-month. The Composite Business Sentiment Index (CBSI) fell by 0.6 points to 95.1 in July, and the CBSI outlook for August increased by 0.3 points to 93.4 month-on-month. In June, the cyclical indicator of the coincident composite index decreased by 0.1 point from the previous month, and the cyclical indicator of the leading composite index increased by 0.2 points. In July, the economy added 172,000 jobs compared to the previous year and the unemployment rate fell by 0.2 percentage points from a year ago to 2.5 percent. In July, the Consumer Price Index (CPI) grew by 2.6 percent from the previous year. The index excluding food and energy prices increased by 2.2 percent, and the index excluding agricultural and petroleum products increased by 2.1 percent. The CPI for basic necessities rose by 3.0 percent. In July, Korean equity prices fell, the Korean Won strengthened against the dollar, and the Korean Treasury Bond yields fell driven by strong growing expectations of a potential interest rate cuts by the U.S. Fed. In July, housing prices increased (up 0.15% m-o-m) , and Jeonse (lump-sum deposits with no monthly payments) prices rose (up 0.16% m-o-m) . With signs of inflation continuing to moderate, the Korean economy’s recovery gained further momentum as the domestic market showed signs of a rebound mainly driven by increased facilities investment in addition to a pickup in manufacturing and exports. The global economy is showing an overall recovery trend, mainly driven by the upturn in manufacturing activity and trade. However, the pace of recovery differs across regions, amid continuing uncertainties associated with geopolitical risks such as the Russia-Ukraine conflict and instability in the Middle East, and growing volatility of commodities prices, and economic slowdown in major countries. The government plans to promptly implement key policy measures outlined in the Economic Policy Directions for the second half of 2024, such as focusing price stabilization, supporting small business owners, and shoring up domestic demand. Moreover, the government also plans to push forward its policy agenda outlined in the Dynamic Economy Roadmap, which will focus on improving the public’s quality of life and enhancing the sustainability of the Korean economy.

The August issue addresses the challenges and improvement directions for policies supporting North Korean defectors. While these policies have seen continuous modifications, they now face new demands for qualitative changes. The government has established 'North Korean Defectors' Day' and reaffirmed its commitment, yet criticisms persist regarding the lack of tailored support, indicating improved policy efficiency. The city of Seoul has expanded its support, with around 20% of defectors residing there. The settlement status of these defectors is analyzed through demographics, economic activity, and social integration, offering policy insights. Economic hardship remains prevalent among defectors, underscoring the need for effective economic education. KDI's economic education program aims to enhance defectors' economic independence. There's a clear need for both quantitative and qualitative improvements in this education, requiring systematic and well-designed approaches to better support defectors' social integration and economic stability in South Korea.

The Impact of US Export Controls on Korean Semiconductor Exports / Hanhin Kim and Jaehan Cho This study empirically investigates the impact of recent US export controls on China on South Korea’s semiconductor exports. We analyze South Korean export data to shed light on the repercussions of US export restrictions on a third country. Our findings reveal a significant decline in Korean semiconductor exports following the October 2022 imposition of US controls. This decline was most pronounced in the memory, discrete devices, and discrete device components subsectors of the semiconductor industry. In addition, we observed a decrease in unit prices, especially for memory semiconductors, pointing to downward pressure on South Korea’s high-value-added semiconductor exports. These results provide some evidence of substantial negative impacts of US export controls on South Korea’s semiconductor industry, and particularly with regard to its high-tech products. Trump Tariffs and Roundabout Trade / Tadashi Ito Although there are many news articles of tariff dodging via the rerouting of made-in-China goods through third countries, relabeling these goods as made in Mexico or made in Vietnam, there have been no scientific studies on this issue. This paper provides statistical evidence regarding whether such practices are taking place. Using monthly trade statistics at the most disaggregated level and analyzing data up to 2019, the year before the COVID-19 shock, little evidence of roundabout trade is found. With an extended dataset up to 2023, overall there is little sign of roundabout trade, although some slight signs of roundabout trade are found for Mexico and Vietnam. Experts to the US and Imports from China during the US-China Tariff War: Evidence from Regional Trade Data in Vietnam / Kazunobu Hayakawa This study empirically investigates how the exports of downstream products to the US change the imports of their upstream products from China during the US-China tariff war. To accomplish this, we use province-level trade data in Vietnam, known to be a country that increased its exports to the US market in place of China, i.e., known to enjoy a trade diversion in the US market. The use of regional trade data enables us to capture the input-output linkages more precisely. Specifically, focusing on the trade in general and electrical machinery industries from January of 2019 to December of 2023, we regress imports of upstream products from China on exports of their downstream products to the US, finding that the rise of exports of downstream products to the US significantly increases imports of their upstream products from China. On the other hand, the rise in these products does not significantly increase the imports of upstream products from Japan, Korea, and Taiwan. Furthermore, the inputoutput linkage between exports to the US and imports from China was found to be greater in provinces with better business environments in terms of entry costs, transparency in public services, and public support to businesses. Economic Effects of Unemployment Insurance for Entrepreneurs in South Korea / Jiyeon Kim This paper aims to examine the economic impact of the implementation of an unemployment insurance (UI) program for entrepreneurs in South Korea. Despite facing labor market risks similar to paid employees, entrepreneurs are often not eligible for UI in many countries. South Korea, where entrepreneurs represent over 20% of the workforce, is considering a design of UI for entrepreneurs, with the goal of providing coverage to this group by 2025. This study examines how the addition of UI for entrepreneurs would impact the economy using a model of entrepreneurship based on a search and matching framework. The study’s findings suggest that the implementation of UI for entrepreneurs would lead to increased business closures and reduced hiring, resulting in a slack labor market, which in turn would reduce social welfare overall. However, social welfare can be improved by subsidizing UI contributions paid by entrepreneurs, which provides the greatest improvement in social welfare compared to other social protection systems such as unemployment assistance.