In March, industrial production, facilities investment, and retail sales increased, while construction investment decreased. In April, the increase in the number of employed persons slowed, while consumer prices accelerated on a month-on-month basis. In March, total industrial production rose (up 0.3% m-o-m and up 3.5% y-o-y), as gains in the industrial sector (up 0.3% and up 3.6%) and services sector (up 1.4% and up 5.1%) outweighed a decline in construction (down 7.3% and down 5.4%). The cyclical indicator of the coincident composite index for March went up by 0.5 points and the cyclical indicator of the leading composite index increased by 0.7 points. In March, facilities investment moved up (up 1.5% m-o-m and up 9.2% y-o-y) and retail sales increased (up 1.8% and up 5.0%). In April, the consumer sentiment index (CSI) went down by 7.8 points month-on-month to 99.2. The composite business sentiment index (CBSI) grew by 0.8 points to 94.9 and the CBSI outlook for May increased by 0.8 points to 93.9. In April, exports climbed by 48.0% year-on-year, supported by expanded exports of semiconductor, computers, and ships. Average daily exports rose by 48.0% in April compared to the same month of last year. In April, the number of employed persons grew by 74,000 from a year earlier, while the unemployment rate remained unchanged at 2.9%. The year-on-year consumer price index (CPI) climbed by 2.6 percent, up from 2.2 percent in April, while the index excluding food and energy rose by 2.2 percent, the index excluding agricultural products and petroleum products rose by 2.2 percent, and the CPI for living necessities increased by 2.9%. In April, stock prices rose, Korean Treasury Bond yields increased, and the Korean won strengthened. In April, both housing prices (up 0.16%, m-o-m) and Jeonse (lump-sum deposits with no monthly payments) prices (up 0.31%, m-o-m) continued to climb. Recently, the Korean economy has maintained its recovery momentum, with growth expanding significantly in the first quarter; however, downside risks to the economy persist due to the conflict in the Middle East. Exports, led by semiconductors, have remained strong, and domestic demand, including consumption, had continued to improve. However, the Middle East conflict has weighed on consumer sentiment, raising concerns about higher inflation driven by rising global oil prices and increasing burdens on households. The global economy has maintained a moderate growth trend; however, the conflict in the Middle East has heightened volatility in international financial markets and energy prices, raising concerns over supply chain disruptions, mounting inflationary pressures, and a slowdown in growth. To minimize the impact of the Middle East conflict, the government will maintain an emergency economic response framework, while swiftly implementing the supplementary budget including support payments for damages caused by high oil prices and making every effort to stabilize livelihoods through supply-demand management of key items and price stabilization measures.

The May 2026 issue examines the Lee Jae Myung administration’s Korean Peninsula Peaceful Coexistence Policy while using quantitative and satellite-based evidence to assess North Korea’s industrial and economic conditions. Against the backdrop of Pyongyang’s “two hostile states” doctrine and deepening alignment with Moscow, it emphasizes the need to manage tensions, keep channels for dialogue and contact open, and recalibrate inter-Korean relations. Drawing on the North Korea Industry and Enterprise Database and satellite indicators, including nighttime lights, the issue identifies uneven, heavy industry-led growth linked to North Korea？Russia military cooperation, alongside persistent structural constraints across industry. It also examines fisheries through market prices and satellite data, shifts in the agency of North Korean overseas workers amid competition and wage shocks in China and Russia, and proposals for cooperation infrastructure, including an East-West Peace Expressway, disaster monitoring, and legal reforms for border areas. Overall, it highlights an industrial sector being sustained rather than renewed, and the growing potential of data-driven monitoring to inform mid- to long-term policy for inter-Korean relations and a peace economy.

The Effects of Increased Korea Treasury Bond Issuance on the Yield Curve / MEEROO KIM AND JONG SOO HONG This study examines the impact of the sharp increase in Korea Treasury Bond (KTB) issuance following the COVID-19 crisis and analyzes the effects of bond buybacks as a policy countermeasure. Using a dynamic Nelson-Siegel model with macroeconomic factors, we estimate the effects of changes in the bond supply on the yield curve. Empirical results show that a KRW 1 trillion increase in KTB issuance raises yields by approximately 2.5 to 2.9 basis points, with stronger effects observed in the post-COVID period and in medium- to long-term maturities with weaker demand. Conversely, emergency buybacks reduce yields by about 1.9 to 2.1 basis points, with similar maturity dependent dynamics. These findings highlight the importance of demand conditions in amplifying the interest rate effects of government bond supply shocks. CBDC and Bank Money Creation / SUNJOO HWANG This paper examines the impact of a retail type of Central Bank Digital Currency (CBDC) on bank lending. While concerns exist that CBDC could reduce bank lending by diverting deposits from commercial banks to the central bank, this paper argues that the relationship between CBDC and bank lending is more complex because real-life banks do not lend out of deposits but instead create deposits by making loans. By examining a model of “fountain pen money” creation, the paper shows that a bank's lending capacity is influenced by both cash deposits and an augmentation factor. While CBDC reduces the capacity for lending as some deposits shift to the central bank, the magnitude of this reduction depends on the size of the augmentation factor and may not lead to a significant decrease in bank lending. In economies where banks lend close to their deposit base, such as in South Korea, the reduction in lending due to CBDC is likely to be marginal. Furthermore, this paper explores the social welfare implications of the contractionary effect of CBDC, showing that if the money creation constraint is weakly binding, CBDC can improve social welfare by mitigating excessive lending. Conversely, if the money creation constraint is strongly binding, CBDC may reduce social welfare by exacerbating credit shortages. The Effects of Parental Competitive Pressure on Private Education Investment / SUNGMIN HAN AND SEUNGJOO HAN In South Korea, education serves as a critical engine for social mobility, where academic credentials from prestigious universities function as a decisive factor in shaping career trajectories and earning potential. This dynamic has fostered intense educational fervor and led to the proliferation of a massive private education market. This study empirically examines the relationship between parental competitive pressure ？ defined as a synthesis of achievement expectations and anxiety ？ and investment in private education within a highly competitive educational environment. The analysis shows that private education expenditures are positively associated with parental competitive pressure. Notably, this increase occurs primarily through greater spending rather than an increase in total tutoring hours. This pattern suggests that, given children’s time constraints, highly pressured parents strategically prioritize quality over quantity. Furthermore, the effect varies across family backgrounds, indicating that reliance on private education reflects the interplay between socio-structural factors and household resources, thereby reproducing inter generational educational inequality. Overall, it was found that dependence on private education is a structural phenomenon amplified by status competition within a success-oriented society. Consequently, policy interventions should shift away from superficial regulations and focus on addressing the fundamental socioeconomic drivers of parental competitive pressure. Volatility Spillover Effects in Foreign Exchange Markets among China, Japan, and South Korea / BOK-KEUN YU AND KWON SIK KIM This paper analyzes the dynamic spillover effects of exchange rate volatility among the foreign exchange markets of China, Japan, and South Korea from January of 2010 to March of 2024 based on exchange rate determinataion theories, the GJR-GARCH model, and the TVP-VAR model. The key empirical results are as follows. First, while the factors determining the CNY/USD, JPY/USD, and KRW/USD exchange rates are somewhat different, it was found that CNY/USD is influenced by the short-term interest rate differential with the U.S., JPY/USD is affected by the VIX and by a COVID-19 dummy, and KRW/USD is impacted by the difference in the money supply change rate with the U.S. and the VIX. Second, the exchange rate volatility of the three currencies was found to exhibit the well-known persistence and leverage effects. Third, regarding the time-varying spillover effects of exchange rate volatility between the three countries’ foreign exchange markets, the transmission effects of exchange rate volatility between the three countries varied with the timing, frequency, and persistence.

In many respects, 2025 can be understood as a year of transition for the North Korean economy. Rather than marking a decisive break from previous trends, the year reflected the authorities’ efforts to stabilize the gains achieved during the recovery period while simultaneously preparing the foundation for a new stage of economic development beyond the current Five-Year Plan. Although signs of improvement became increasingly visible in selected sectors of the official economy, important questions remain regarding the sustainability, scope, and structural implications of this recovery.