Next Year Outlook: Clear Skies for Information & Communication, Semiconductors, and Biohealth... Cloudy for Automobiles, Steel, and Secondary Batteries

Korea Institute for Industrial Economics and Trade, 2025 Economic and Industrial Outlook Report
South Korean Economy to Grow 2.1% Next Year... Slight Slowdown
Exports of 13 Key Industries Expected to Increase by 2.2%

Next year, the South Korean economy is expected to grow by 2.1%, showing a slight slowdown compared to this year. Exports of the 13 key industries are projected to increase by only 2.2%, influenced by this year's base effect. The inauguration of Donald Trump's second administration in the United States is analyzed to have both positive and negative impacts on the South Korean economy.

In the '2025 Economic and Industrial Outlook' report released on the 25th by the Korea Institute for Industrial Economics and Trade, it was forecasted that the domestic economy next year will grow by 2.1%, slightly down from this year's growth forecast of 2.2%. The report stated, "In 2025, the domestic economy is expected to grow by 2.1% as construction investment remains sluggish, but exports maintain an increasing trend, and consumption and facility investment gradually recover." It also noted, "Major uncertainties such as changes in U.S. economic policies, geopolitical risks like wars, and the pace of global information technology (IT) recovery could exert considerable downward pressure."

By sector, consumption next year is expected to grow by 1.9%, showing a moderate recovery supported by interest rate cuts, increased real income, and price stability. Facility investment is projected to grow by 2.9%, influenced by improved performance of major companies due to the global IT market upswing and interest rate cuts. Construction investment is expected to continue its sluggish trend with a 0.9% contraction following this year's -1.8% decline.

Exports are forecasted to increase by 2.2%, driven by sustained export growth in the semiconductor and IT sectors, with the trade surplus slightly expanding to $48.7 billion compared to this year. Exports of the 13 key industries are also expected to rise by 2.2% year-on-year, supported by a gradual recovery in global demand due to interest rate cuts and continued growth in IT exports such as semiconductors and information communication devices. However, expansion of overseas production, delayed recovery in China, and increased competition are analyzed to constrain the export growth of Korean companies.

This year, despite export sluggishness in material industries like steel, general machinery, and secondary batteries, exports of semiconductors, information communication devices, shipbuilding, and biohealth sectors are expected to drive a 10.3% growth compared to 2023.

Looking at the outlook for the 13 key industries next year by sector, information communication devices, semiconductors, and biohealth industries are expected to show robust growth in exports, domestic demand, and production indicators. Meanwhile, shipbuilding, home appliances, and display industries may experience stagnation or slowdown in growth. General machinery, petrochemicals, and refining are assessed to enter a gradual recovery phase, but the automobile, steel, textile, and secondary battery sectors are expected to remain in a somewhat depressed state.

For the United States, a major export destination, positive factors such as recovery in the real estate market, continued infrastructure investment, demand for AI server replacements, and expanded prescriptions of biopharmaceuticals could support demand recovery. However, negative factors like the resolution of pent-up demand for automobiles, slowdown in electric vehicle sales, and economic policy changes following the inauguration of the Trump administration are expected to act as variables going forward.

In Europe, positive conditions are anticipated for demand in automobiles, steel, petrochemicals, information communication devices, and secondary batteries, supported by accumulated purchasing demand, potential resumption of electric vehicle subsidies, restructuring of aging facilities, and expansion of IT infrastructure.

In China, demand for general machinery, steel, textiles, and home appliances is expected to remain sluggish due to continued growth stagnation in 2025. However, ICT demand is expected to turn positive, and the high growth of the electric vehicle market is anticipated to improve demand for domestically produced intermediate goods such as petrochemical products. Nonetheless, the possibility of an overall contraction in the Chinese market due to strengthened U.S. sanctions remains.

The report analyzed, "With the inauguration of the second Trump administration following the U.S. presidential election, mixed positive and negative factors are expected for domestic industries." It added, "The automobile and secondary battery industries could face significant negative impacts on exports and production if universal tariffs are imposed and policies supporting eco-friendly industries are rolled back." On the other hand, industries such as shipbuilding, information communication devices, and displays may benefit from the countermeasures against China, and exports of general machinery are expected to increase due to energy transition policies centered on fossil fuels."