In September, facilities investment increased while construction investment decreased. Industrial production adjusted after a sharp rebound in the previous month. In October, job growth increased and the growth of consumer prices continued to moderate. In September, total production fell (down 0.3% m-o-m and down 1.1 y-o-y) , as industrial production (down 0.2% m-o-m and down 1.3% y-o-y) , services production (down 0.7% m-o-m and down 0.2% y-o-y) , and construction production (down 0.1% and down 12.1% y-o-y) declined, while public administration increased (up 2.6% m-o-m and up 1.3% y-o-y) . In September, facilities investment (up 8.4% m-o-m and up 6.1% y-o-y) surged, while retail sales (down 0.4% m-o-m and down 2.2% y-o-y) and construction investment (down 0.1% m-o-m and down 12.1% y-o-y) decreased. In October, exports increased by 4.6 percent from a year ago, driven by growth in semiconductor and automobile exports. In October, the Consumer Sentiment Index (CSI) increased by 1.7 points to 101.7 month-on-month. The Composite Business Sentiment Index (CBSI) moved up by 0.9 points in October, while the CBSI outlook for November fell by 2.8 points to 89.8. In September, the cyclical indicator of the coincident composite index fell by 0.1 points month-on month, while the cyclical indicator of the leading composite index remained unchanged. In October, the economy added 83,000 jobs compared to the previous year and the unemployment rate rose by 0.2 percentage points from a year ago to 2.3 percent. In October, the year-on-year growth of Consumer Price Index (CPI) slowed down to 1.3 percent. The index excluding food and energy prices increased by 1.8 percent, and the index excluding agricultural and petroleum products increased by 1.7 percent. The CPI for basic necessities rose by 1.2 percent. In October, Korean equity prices fell, the Korean Treasury Bond yields rose, and the Korean Won weakened against the dollar. In October, housing prices and Jeonse (lump-sum deposits with no monthly payments) prices rose at a slower rate than the previous month (up 0.07% m-o-m and up 0.16% m-o-m, respectively) . As prices have continued to stabilize recently, the Korean economy has been able to show a sustained recovery. However, economic uncertainties still persist, both domestically and globally. While the global economic is broadly on a recovery path, uncertainties are increasing owing to persistent geopolitical risks in the Middle East and potential changes in the trade environment. Against this background, the Korean government plans to mobilize a comprehensive policy response system in finance, trade, and industry. The government also plans to strengthen support for vulnerable sectors such as construction investment and small business owners with a range of tailored policies alongside the measures outlined in the ‘Dynamic Economy Roadmap’ to enhance the sustainability of the Korean economy.

This issue delves into the intensifying North Korea-Russia relations and their economic, military, and diplomatic ramifications. Following the "Comprehensive Strategic Partnership Agreement," North Korea has deepened political, economic, and military cooperation with Russia. This alliance, driven by the protracted Russia-Ukraine conflict, has enabled North Korea to secure foreign currency and rejuvenate its defense industry through arms exports and labor deployment. Russia, in turn, supplies military technology and economic aid, advancing North Korea's defense modernization and provocation capabilities. Nevertheless, Russia is unlikely to supplant China as North Korea's primary economic partner, given China's stable trade relations and superior qualitative contributions to economic growth. Militarily, North Korea's collaboration with Russia accelerates its strategic weapons development and offensive capabilities. However, Russia is expected to temper its support to balance international criticism with its wartime priorities. As the incoming Trump administration raises the prospect of a ceasefire in Ukraine, South Korea must ensure active participation in U.S.-Russia discussions on Korean Peninsula issues and mitigate the security risks posed by North Korea's expanding defense capabilities.

The Impact of US Export Controls on Korean Semiconductor Exports / Hanhin Kim and Jaehan Cho This study empirically investigates the impact of recent US export controls on China on South Korea’s semiconductor exports. We analyze South Korean export data to shed light on the repercussions of US export restrictions on a third country. Our findings reveal a significant decline in Korean semiconductor exports following the October 2022 imposition of US controls. This decline was most pronounced in the memory, discrete devices, and discrete device components subsectors of the semiconductor industry. In addition, we observed a decrease in unit prices, especially for memory semiconductors, pointing to downward pressure on South Korea’s high-value-added semiconductor exports. These results provide some evidence of substantial negative impacts of US export controls on South Korea’s semiconductor industry, and particularly with regard to its high-tech products. Trump Tariffs and Roundabout Trade / Tadashi Ito Although there are many news articles of tariff dodging via the rerouting of made-in-China goods through third countries, relabeling these goods as made in Mexico or made in Vietnam, there have been no scientific studies on this issue. This paper provides statistical evidence regarding whether such practices are taking place. Using monthly trade statistics at the most disaggregated level and analyzing data up to 2019, the year before the COVID-19 shock, little evidence of roundabout trade is found. With an extended dataset up to 2023, overall there is little sign of roundabout trade, although some slight signs of roundabout trade are found for Mexico and Vietnam. Experts to the US and Imports from China during the US-China Tariff War: Evidence from Regional Trade Data in Vietnam / Kazunobu Hayakawa This study empirically investigates how the exports of downstream products to the US change the imports of their upstream products from China during the US-China tariff war. To accomplish this, we use province-level trade data in Vietnam, known to be a country that increased its exports to the US market in place of China, i.e., known to enjoy a trade diversion in the US market. The use of regional trade data enables us to capture the input-output linkages more precisely. Specifically, focusing on the trade in general and electrical machinery industries from January of 2019 to December of 2023, we regress imports of upstream products from China on exports of their downstream products to the US, finding that the rise of exports of downstream products to the US significantly increases imports of their upstream products from China. On the other hand, the rise in these products does not significantly increase the imports of upstream products from Japan, Korea, and Taiwan. Furthermore, the inputoutput linkage between exports to the US and imports from China was found to be greater in provinces with better business environments in terms of entry costs, transparency in public services, and public support to businesses. Economic Effects of Unemployment Insurance for Entrepreneurs in South Korea / Jiyeon Kim This paper aims to examine the economic impact of the implementation of an unemployment insurance (UI) program for entrepreneurs in South Korea. Despite facing labor market risks similar to paid employees, entrepreneurs are often not eligible for UI in many countries. South Korea, where entrepreneurs represent over 20% of the workforce, is considering a design of UI for entrepreneurs, with the goal of providing coverage to this group by 2025. This study examines how the addition of UI for entrepreneurs would impact the economy using a model of entrepreneurship based on a search and matching framework. The study’s findings suggest that the implementation of UI for entrepreneurs would lead to increased business closures and reduced hiring, resulting in a slack labor market, which in turn would reduce social welfare overall. However, social welfare can be improved by subsidizing UI contributions paid by entrepreneurs, which provides the greatest improvement in social welfare compared to other social protection systems such as unemployment assistance.