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What's Up Monthly
May 20, 2025 ｜ vol. 21
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In today's newsletter:
- KDI Economic Outlook 2025: 1st half
- KDI-BOK Joint Symposium on Poverty and Labor in a Super-Aged Society
- Spotlights on 1) Korea's Higher Education Crises and 2) Responses to Carbon-Based Trade Measures
- Invitation: ADB K-Hub-KDI GKEDC Climate Technology Business Seminar
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KDI Economic Outlook 2025: 1st half
Korea’s economy is projected to grow by 0.8% in 2025, weighed down by a prolonged slump in the construction sector and deteriorating trade conditions. However, in 2026, growth is expected to recover modestly to 1.6%, driven by a gradual rebound in domestic demand, despite lingering risks from global trade disputes.
Private consumption and equipment investment are forecast to improve slowly, supported by easing political uncertainty and steady investment demand in the semiconductor sector. Construction investment is likely to begin a gradual recovery in line with a rebound in construction orders. Conversely, exports are projected to grow at a slower pace due to weakened global trade amid higher U.S. tariffs. Despite improved terms of trade, the current account surplus is expected to shrink, reflecting lackluster export performance.
Key Economic Indicators
- - Inflation: Consumer prices are expected to rise by 1.7% in 2025, slightly increasing to 1.8% in 2026, driven by softening growth and falling oil prices.
- - Private Consumption: Growth will improve from 1.1% in 2025 to 1.6% in 2026, reflecting greater policy stability and interest rate cuts.
- - Equipment Investment: Investment will continue to rise (1.7% in 2025, 1.6% in 2026) amid stable demand in semiconductor-related industries.
- - Construction Investment: While remaining weak in 2025 (-4.2%), it is expected to increase by 2.4% in 2026 with improved construction orders.
- - Exports: Export growth will remain subdued, rising from 0.3% in 2025 to 0.8% in 2026, due to trade contraction from higher U.S. tariffs.
- - Current Account Surplus: Despite improved trade terms, the surplus is expected to decline from $92.0 billion in 2025 to $80.4 billion in 2026, due to weak exports.
- - Employment: The annual increase in employed persons will slow from 90,000 in 2025 to 70,000 in 2026, amid deteriorating labor market conditions.
Policy Recommendations for 2025–2026
To support economic recovery and safeguard stability, fiscal policy should be managed prudently, with careful attention to growing deficits and long-term spending pressures. Monetary policy is advised to remain accommodative in order to counter subdued demand and downward inflationary pressures. In the financial sector, support should be limited for non-viable firms, while macroprudential measures should be applied consistently to maintain overall stability.
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KDI-BOK Joint Symposium Explores
Policy Directions for Poverty and Labor
in a Super-Aged Society
At the KDI-BOK Joint Symposium held on May 15, 2025, under the theme “Poverty and Labor in a Super-Aged Society: Exploring Policy Directions,” experts from KDI and BOK (Bank of Korea) presented in-depth analyses on the socioeconomic implications of Korea’s demographic transition and proposed targeted policy solutions.
Discussions highlighted the need to revise Basic Pension eligibility based on median income, expand reverse mortgage systems to convert assets into retirement income, and reform outdated wage structures to improve job security and labor force participation among older adults. The symposium underscored the importance of comprehensive, forward-looking policies to ensure income stability and sustainable employment for Korea’s aging population.
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Author Interview
Crises in Higher Education:
The Future of Regional Universities
As regional universities face mounting pressure from declining enrollment and the threat of consolidation, recent KDI research highlights the profound impact of Korea’s demographic decline on higher education. Dr. Seongmin Han, Senior Fellow of the Division of Public Policy Evaluation, discusses policy responses, the uneven burden on non-metropolitan institutions, and what can be done to ensure their sustainability in the years ahead.
Explore more >
KDI Research
Strategic Response to
Carbon-Based Trade Measures
With climate concerns reshaping global trade, Dr. Heehyun Lim, Fellow at KDI, explores how Korea can respond to emerging carbon-based trade measures like the EU’s Carbon Border Adjustment Mechanism (CBAM). Although current impacts on Korean exports are limited, the policy’s widening scope could pose future challenges. Dr. Lim emphasizes proactive strategies—carbon pricing, clean tech investment, and green supply chains—to strengthen Korea’s trade competitiveness.
Explore more >
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ADB K-Hub-KDI GKEDC Climate Technology Business Seminar
Join us for the Climate Technology Business Seminar, co-hosted by KDI and the ADB Korea Climate Technology Hub (K-Hub). This event will introduce the ADB K-Hub initiatives and the CAREC Climate Technology Challenge, and introduce innovative climate technologies of Korean companies. Live streaming will be available as well!
Date: Thursday, May 22, 2025 / 09:00-16:40 (KST) (Program)
Key Highlights:
- Introduction to ADB K-Hub, CAREC Challenge, and the ADB Technology Forum initiatives
- Presentation and discussion on Korean climate technologies in the following areas: ▲Energy Transition, ▲Digitalization of Supply Chains, Infrastructure, and Transport, ▲Water Management, ▲Waste Management and Circular Technology, ▲Climate Resilience in Agriculture
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KDI Ranked #1 in Brand Reputation
In April, KDI was recently ranked #1 in brand reputation among 27 public institutions under the Prime Minister’s Office. We are honored by this recognition and remain committed to serving as a trusted policy research institute—advancing knowledge, informing policy, and contributing to the public good.
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