The Korean economy continues to experience good export performance but sluggish domestic demand recovery.

Although South Korea’s exports remain strong recently, the sluggish recovery of domestic demand continues. As a result, the public’s perception of the economy is also unlikely to improve.

The Hyundai Research Institute’s report, “Recent Economic Trends and Business Sentiment,” states that South Korea’s economy this year will mainly rely on exports for growth, especially in the information technology (IT) sector. However, the contribution of export growth to job creation is expected to be limited. In other words, the positive effects of export growth are unlikely to translate into a boost in domestic demand.

A concern for the South Korean economy is the weak recovery of domestic demand. The construction industry has been in long-term decline, with investment in construction continuously shrinking since 2018. Although a slight rebound is expected this year, the overall downturn persists and is likely to constrain economic growth.

Future risks to the economy include uncertainties in U.S. tariff policies, rising oil prices due to conflicts in the Middle East, and potential changes in the U.S. Federal Reserve’s monetary policy. Especially, recent energy price increases caused by conflicts with Iran may burden the South Korean economy, potentially delaying the recovery of domestic demand and reducing real purchasing power due to rising prices.

Overall, South Korea’s economy faces multiple internal and external risks. Under these circumstances, economic growth rates may struggle to exceed potential growth. The ongoing imbalance between exports and domestic demand suggests that the public’s perception of economic conditions is unlikely to improve significantly. This trend will also be an important variable affecting South Korea’s long-term economic growth prospects.