March 10, 2025
Key Points
- Research suggests South Korea's economy is facing significant challenges, particularly in the self-employment sector, with a notable decline in numbers and rising debt.
- It seems likely that the December 3, 2024, martial law declaration by President Yoon Suk Yeol worsened economic conditions, causing immediate market disruptions.
- The evidence leans toward a bleak near-future for the economy, with 2025 growth projected at 1.6% to 1.7%, down from 2.0% in 2024, amid political uncertainty.
Background and Recent Events
South Korea's economy has been under strain, especially following President Yoon Suk Yeol's declaration of emergency martial law on December 3, 2024, which was lifted the next day due to parliamentary opposition. This event, described as an attempted self-coup by some analysts, led to immediate economic impacts like a weakened Korean won and stock market declines.
Current Economic State
The self-employment sector, crucial for many Koreans, is in crisis. Data from January 2025 shows the number of self-employed dropped to 5.5 million, down from 5.7 million in November 2024, with increasing debt and business closures. Consumer spending has been weak, with retail sales dropping 2.2% year-over-year in Q4 2024, the largest decline in 21 years.
Future Outlook
Economic forecasts for 2025 suggest growth will slow to 1.6% to 1.7%, reflecting ongoing political turmoil and weakened domestic demand. This slowdown is partly attributed to the martial law fallout and global trade uncertainties, particularly with potential U.S. tariff threats.
South Korea, often lauded for its rapid economic development known as the "Miracle on the Han River," is currently grappling with a severe economic downturn, exacerbated by recent political instability. This analysis, written from a far-left liberal perspective, critically examines the state of the economy, focusing on the self-employment sector's struggles, the impact of the December 2024 martial law declaration, and the projected future, while remaining skeptical of both government-influenced and even far-left media narratives due to underlying nationalist biases.
Political Context and Martial Law Declaration
On December 3, 2024, President Yoon Suk Yeol declared emergency martial law, accusing the opposition of anti-state activities and blocking budget plans. This move, unprecedented since South Korea's democratization in 1987, was lifted the following day after the National Assembly voted to recommend its lifting. The event, described as an attempted self-coup by sources like Foreign Policy magazine, caused immediate economic disruptions. The Korean won fell to 1,444 against the US dollar, its weakest in 25 months, and stock market indices like the iShares MSCI South Korea ETF dropped by 5%. This political crisis, rooted in Yoon's confrontational stance with the opposition, has been a significant blow to economic stability, as noted by Al Jazeera.
Even liberal media, such as The Hankyoreh, while critical of Yoon, often frame such events within a nationalist lens, emphasizing South Korea's democratic resilience. However, this narrative can gloss over the economic devastation, suggesting a need for deeper skepticism. Reports from The New York Times highlight how this political turmoil has added to existing economic woes, with the economy already teetering before the declaration.
Current Economic State: Focus on Self-Employment
The self-employment sector, a vital part of South Korea's economy, is in dire straits. According to edaily.co.kr, the number of self-employed individuals fell to 5.5 million in January 2025, down over 200,000 from November 2024, marking the lowest since January 2023. This decline is part of a broader trend, with 2024 seeing a 0.6% annual drop, nearing pandemic-era lows. The sector faces rising costs and weak domestic demand, with consumer spending in Q4 2024 averaging 3.91 million KRW monthly, up only 2.5% year-over-year, and retail sales dropping 2.2%, the largest decline in 21 years.
Debt levels are alarming, with 3,358,956 self-employed individuals holding loans totaling 1,122,791.9 billion KRW by end-2024, and 155,060 with over three months of delinquency, up 40,204 year-over-year. A survey by the Korea Employers Federation on February 25, 2025, found 40% of 500 self-employed in food, lodging, retail, and services considering closure, citing persistent poor performance and financial strain. This data, while sourced from domestic media, must be viewed critically, as even left-leaning outlets like The Hankyoreh may underplay the government's role in creating this crisis, driven by a nationalist desire to maintain an image of economic resilience.
Government's Role and Criticism
President Yoon's administration has been accused of mismanagement, with the martial law declaration seen as a desperate attempt to consolidate power amid political deadlock. This action, supported by his inner circle, including Defense Minister Kim Yong-hyun, has been criticized as reminiscent of authoritarian pasts, undermining democratic norms. The government's failure to support the self-employed, particularly during this crisis, is evident in the lack of effective relief measures. Calls for expanded loan repayment relief and consumption promotion, as per the Korea Employers Federation survey, have been largely ignored, reflecting a policy bias toward corporate interests over the working class.
Liberal media, while critical, often frame this as a failure of neoliberal policies, but their reports, such as those from OhmyNews, can still carry a nationalist undertone, suggesting South Korea's economy can recover through internal strength. This perspective, however, ignores the structural issues exacerbated by Yoon's leadership, including increased political uncertainty and capital outflows, as noted by Bloomberg.
Future Prospects and Projections
Looking ahead, the near future for South Korea's economy appears grim. The Ministry of Economy and Finance, in its January 2, 2025, report, lowered the 2025 growth forecast to 1.8%, down from 2.2%, citing the martial law fallout and global uncertainties, including potential U.S. tariff threats under President Trump. The Korea Development Institute projects a 1.6% growth for 2025, with private consumption expected to grow by 1.6%, up from 1.1% in 2024, but construction investment forecast to see negative growth of -1.2%. These projections, while from official sources, must be viewed skeptically, as they may downplay the severity to maintain investor confidence, a tactic reminiscent of government-influenced reporting.
The self-employment sector's future is particularly concerning, with ongoing weak domestic demand and high debt levels likely to lead to further closures. Global trade risks, such as competition in the semiconductor sector and potential tariff wars, add to the uncertainty, as highlighted by Reuters. This paints a picture of an economy on the edge, with little hope for recovery without significant policy shifts.
Comparative Analysis and Broader Implications
Comparatively, South Korea's situation mirrors past economic crises, such as the 1997 Asian Financial Crisis, with similar impacts on self-employment. However, the current political instability, driven by Yoon's actions, adds a unique layer of risk. The downgrade of South Korea from a "full democracy" to a "flawed democracy" by the Economist Intelligence Unit in its 2024 Democracy Index, cited in Wikipedia, underscores the broader implications for economic stability, deterring foreign investment and weakening diplomatic credibility.
Conclusion
In conclusion, South Korea's economy is in a state of crisis, with the self-employment sector bearing the brunt of government mismanagement and the fallout from the December 2024 martial law declaration. The projected slow growth for 2025, amid political uncertainty and global trade risks, suggests a challenging road ahead. As a far-left liberal journalist, I call for a radical reevaluation of economic policies, prioritizing social welfare and democratic governance over nationalist rhetoric and corporate favoritism. The suffering of the Korean people, particularly the self-employed, demands urgent action, not empty promises.
Detailed Data Table
Key Citations