Welcome to Within The Frame, where we bring you today’s most pressing issues across the globe into focus, I’m Kim Mok-yeon.
As the global economy continues to grapple with uncertainty, South Korea announced its updated economic policy direction for 2025, signaling major shifts in fiscal strategies.
Notably, the government has revised its growth forecast for this year —from 2.2% to 1.8%—a figure that trails behind projections by international organizations.
This revised outlook reflects the complex challenges the country faces, including slower-than-expected domestic recovery, a delicate export environment, and shifting geopolitical dynamics.
To tackle these challenges, the government has unveiled a broad range of policy measures, including a 12.3 billion dollar economic stimulus package.
But with such a comprehensive strategy, one question remains—will these measures be enough to navigate the turbulence ahead?
Today, we unpack the significance of these announcements, and pinpoint some relevant economic policies that will take effect from this year.
For this, we invite Yang Jun-sok, Professor of Economics at The Catholic University of Korea. Welcome.
Also joining us is Song Soo-young, Professor of Business and Economics at Chung-Ang University. Great to have you with us.
1. (SONG) Let’s start with Professor Song, The government has revised its growth forecast for this year down from 2.2% to 1.8%, which is lower than the projections of the OECD, IMF, and the Bank of Korea. What’s driving this revision, and how should we interpret the implications of these changes in policy direction moving forward?
2. (Yang) The government also announced plans to inject 245 billion U.S. dollars this year into the trade industry and revealed tailored support plans for key industries such as semiconductors and shipbuilding. Professor Yang, Do you think this will have a positive impact on the slowdown in exports?
3. (SONG) The government also identified ‘livelihood issues’ as a top priority. To restore livelihoods, it has introduced a 12.26 billion dollar economic stimulus package and announced plans for various support projects. Professor Song could you highlight for us, the key details of this plan?
4. (Yang) With the unstable trade environment and the political impeachment crisis coinciding, the government has also identified the management of “international credibility” as an urgent priority. Professor Yang, what measures has the government proposed to manage its international credibility, and how effective do you think these measures will be?
5. (SONG) Meanwhile, Bank of Korea Governor Lee Chang-yong has also released a message regarding the 2025 monetary policy direction.
He mentioned that the pace of interest rate cuts would be determined flexibly this year. Professor Song, How do you expect the base interest rate to be decided at the upcoming Monetary Policy Committee meeting in two weeks (on January 16)?
6. (Yang) Now, let’s discuss the economic policies changing from this year onward.
One of the most eye-catching change will be the minimum wage increase by 1.7% to 10,030 won per hour.
Professor Yang, what is the significance of the minimum wage surpassing 10,000 won? What do you think about the criticism that this is the second-lowest increase ever and that it falls short of the 2.6% inflation forecast?
7. (SONG) Some research suggests that raising the minimum wage to 10,000 won could have negative effects on economic growth, consumer prices, and employment. Professor Song, Do you think these concerns will materialize? What measures are necessary to mitigate these effects?
8. (Yang) Regarding real estate, various tax benefits are being implemented to ease financial burdens, such as a reduction in prepayment penalties. Professor Yang, What policies in this area are worth paying attention to?
9. (SONG) Starting in July, the two-stage Stress Debt Service Ratio will be applied in three stages. If the stress test at Stage 3 is implemented, household loan limits will decrease and all financial sector loans will be subject to regulation. Professor Song, Will this cool the overheated real estate market?
10. (Yang) Regarding financial market taxation, the Financial Investment Income Tax (FINTAX), which was scheduled to take effect this January, has been repealed after four years of debate. Professor Yang, what was the core idea behind the FINTAX? Can we expect an increase in individual investors’ market participation following the repeal of the tax?
11. (SONG) Right so given that there are many factors putting pressure on the Korean stock market alongside FINTAX, Professor Song could you give us your outlook on the market for the new year?
Source : Arirang TV, https://www.arirang.com/news/view?id=279558
Arirang TV(public institution's name)'s public work is used according to KOGL