In September, services production, facilities investment, and construction investment increased, while industrial production and retail sales declined. In October, the number of employed persons increased and consumer price rose at a faster pace. In September, total production went up (up 1.0% m-o-m and up 6.7% y-o-y), driven by increases in the construction sector (up 11.4% m-o-m and down 4.3% y-o-y) and services sector (up 1.8% m-o-m and up 6.2% y-o-y), despite a decline in the industrial sector (down 1.2% m-o-m and up 11.6% y-o-y). In September, facilities investment increased (up 12.7% m-o-m and up 12.8% y-o-y), while retail sales decreased (down 0.1% m-o-m and up 2.2% y-o-y). In October, exports grew by 3.6 percent year-on-year, supported by a strong performance in the semiconductor industry. Average daily exports rose by 14.0 percent compared to the same month of previous year. In October, the Consumer Sentiment Index (CSI) fell by 0.3 points month-on-month to 109.8. The Composite Business Sentiment Index (CBSI) dropped by 1.0 points to 90.6 in October, and the CBSI outlook for November rose by 2.6 points to 91.1. In September, the cyclical indicator of the coincident composite index rose by 0.2 points and the cyclical indicator of the leading composite index climbed by 0.1 point. In October, the number of employed persons grew by 193,000 compared to the previous year and the unemployment rate fell by 0.1 percentage point to 2.2 percent from the previous year. In October, the Consumer Price Index (CPI) climbed by 2.4 percent year-on-year, driven by agricultural products and petroleum prices. The index when excluding food and energy prices grew by 2.2 percent from a year ago. In October, Korean equity prices climbed, Korean Treasury Bond yields rose, and the Korean Won weakened against the dollar. In October, housing prices rose (up 0.29% m-o-m), and Jeonse (lump-sum deposits with no monthly payments) prices also rose (0.18% m-o-m). Recently, the Korean economy has shown signs of recovery, supported by improvements in domestic demand - particularly consumption - and strong performance in the semiconductor sector, indicating an economic rebound from the weakness seen in the first half of the year. However, employment challenges persist, mainly in vulnerable sectors, and uncertainties remain owing to the pace of recovery in construction investment and the impact of U.S. tariff measures. The global economy continues to face volatility in global financial markets and concerns over slowing trade and growth, due in part to a deteriorating trade environment following tariff measures by major economies. The government plans to strengthen policy efforts, including boosting domestic demand, to ensure that future growth momentum spreads across sectors, while making every effort to expand growth potential through initiatives such as the AI Transformation, Ultra-Innovative Economy flagship projects, and Productive Finance.

The November issue offers a synthesized assessment of the evolution of inter-Korean economic cooperation and the policy context shaping current approaches toward North Korea. Noting that cooperation has long been constrained by a structural cycle of “despair and contrivance,” the issue highlights that future progress will depend on realistic expectations of North Korea’s policy trajectory, a cross-party consensus on North Korea policy, strategic project design aligned with future needs, and a principled approach to engagement. It also reviews current debates on economic involvement with the North and evaluates the Lee Jae Myung administration’s tension-management strategy, observing that Pyongyang’s “two-state” declaration, its tightening alignment with Russia, and the persistence of international sanctions sharply limit near-term prospects. In this environment, policy efforts are expected to center on sustaining humanitarian channels, strengthening legal and institutional foundations, and preparing the groundwork for a future peace-economy framework, alongside building mid- to long-term policy capacity for potential shifts in geopolitical conditions. Overall, the issue provides a balanced view of the constraints and possible avenues for inter-Korean economic cooperation amid strained inter-Korean relations, offering policy insights for building a more sustainable framework for engagement.

Contract Type Selection in Korea’s Large-Scale Retail Sector / JINKOOK LEE, Myeongsik Seo “Using firm-level data on 7,000 suppliers transacting with 26 major South Korean retailers, this study analyzes how contract types, referring to direct purchase, special contract, consignment, and store lease types, are determined and how they affect supplier performance. Contract choice varies systematically by retail format and product category, shaped by transaction costs and asset specificity. Regression results show that direct purchases are positively associated with advanced retailer procurement systems, high supplier trust in the retailer, and stronger supplier bargaining power, while special contracts are more prevalent when supplier-specific investments are required. Instrumental variable estimates indicate that a 1 percentage point increase in the special contract share reduces supplier revenue by approximately KRW 259 million. Regulatory enforcement data reveal that over 75% of unfair trade practices occur in direct and special contract transactions, with special contracts showing the highest violation rate per transaction. These findings suggest that contract type is a key channel through which bargaining asymmetries affect economic outcomes. Policy implications include enhancing supplier bargaining power and improving the oversight of contract-specific risks.” On the Effects of National Debt on the Distribution of Household Assets / SEUNG-RYONG SHIN This study examines the long-term effects of higher national debt in South Korea on asset distribution. Using an overlapping generations general equilibrium model, we focus on two key channels: rising interest rates and falling wage rates, both driven by the crowding-out effect of capital. Higher interest rates increase asset dispersion, benefiting older groups with more accumulated assets, while younger groups with fewer assets gain less. Falling wage rates reduce the capacity to save money across all age groups, partially offsetting the dispersion effects of higher interest rates. A simulation of a 50% increase in national debt reveals a decline in the Gini coefficient of asset holdings, driven by the diminishing marginal increase in future assets relative to current holdings. However, widening cross-sectional dispersion proved more welfare-relevant: older age groups, which experienced greater gains in average assets, saw increases in average welfare, whereas early life-cycle cohorts with low asset levels experienced welfare losses. Given this trade-off associated with higher national debt, initial asset transfers as a counteracting measure can enhance lifetime welfare overall, mitigate the rising asset dispersion, and improve the asset Gini coefficient. The Macroeconomic Effects of Structural Oil Price Shocks: An International GVAR Analysis / SORA CHON This paper investigates the macroeconomic impacts of structural oil price shocks by employing a Global Vector Autoregression (GVAR) framework, utilizing the structural shocks as identified by Baumeister and Hamilton (2019). Our analysis differentiates among three types of oil shocks: economic activity shocks caused by fluctuations in global demand, oil supply shocks driven by production disruptions, and oil inventory demand shocks linked to shifts in market expectations about future supply-demand imbalances. Empirical findings indicate that the macroeconomic consequences of these shocks differ depending on their underlying sources and related structural characteristics. In oil-importing countries such as Korea and China, oil supply disruptions and inventory-related shocks generally exert negative short-term effects on economic activity due to increased import costs and uncertainty-driven price volatility. Conversely, oil-exporting countries such as Canada and the United States respond differently, benefiting from increased export opportunities associated with higher oil prices. Overall, the study emphasizes the critical importance of distinguishing the structural causes of oil price fluctuations, highlighting how the indirect transmission of these shocks through international economic linkages significantly influences domestic macroeconomic performance outcomes. The results provide important implications for policymakers, underscoring the necessity of tailored policy responses to mitigate macroeconomic risks arising from energy transitions and geopolitical uncertainties. Efficiency Effects of Regulations on Unfair Subcontracting Behaviors / YONG HYEON YANG This paper investigates the efficiency effects of governing vertical relationships by analyzing the incentives of firms to engage in exclusive contracts. In particular, the analysis focuses on the subcontracting context. When a downstream firm possesses a superior bargaining position, upstream subcontractors do not prefer an exclusive contract, even when it is efficient, as such a contract lowers their bargaining power even further, ultimately leading to lower profits. It can therefore enhance efficiency to encourage upstream firms to engage in an exclusive contract by limiting bargaining power abuses by superior downstream firms. The paper discusses the required flexibility of such a regulation as well as the evaluation of the current regulation based on the analysis. Sharing Economic Rents with Workers? Evidence from Matched Employer-Employee Data in Vietnam / NOBUAKI YAMASHITA Utilising matched employer-employee data from Vietnamese small and medium enterprises (SMEs) surveys spanning the time frame of 2007-2015, we investigate the extent to which firms share economic rents with their employees through wage adjustments. Our analysis reveals rent-sharing elasticity of 0.08-0.1, demonstrating that small firms with limited market power engage in rent sharing in response to increased economic rents, measured as value added per employee. This rent sharing is prominent if a worker is related to an owner and is engaged in non-production jobs. However, the analysis based on worker panel data indicates caution against interpreting the results as causal evidence.

The year 2024 marked a pivotal moment in North Korea’s economic trajectory, defined by significant internal and external shifts. Domestically, the regime intensified its consolidation of control over economic governance, placing renewed emphasis on the Cabinet-centered system. This shift signaled a strategic departure from the semi-decentralized and informal mechanisms that had previously supported macroeconomic stability during the early years of Kim Jong Un’s leadership. Externally, North Korea’s growing military and economic cooperation with Russia opened new channels for sanctioned trade―particularly in the defense sector―while its economic engagement with China showed signs of stagnation, suggesting a potential recalibration of longstanding external dependencies.