■ Korea's semiconductor exports have been heavily concentrated in the highly volatile memory sector, making the industry more vulnerable to downturns. - As of 2022, the proportion of the highly volatile memory semiconductor sector within Korea's semiconductor market was more than twice that of the global market. This discrepancy may have contributed to the 9.5%p decline in semiconductor exports during Q1. - Despite the growing investment in non-memory semiconductors since 2018, Korea's semiconductor industry continues to exhibit a significant reliance on the memory sector, leading to persistently high levels of volatility in semiconductor exports. ■ The trajectory of the semiconductor industry is shrouded in uncertainty, but certain indicators suggest a potential trough might occur between Q2 and Q3. - The latest replacement cycles of semiconductor-related products, coupled with the trends in production and inventory cycles, hint that the semiconductor industry may be approaching a trough. - A deceleration in the semiconductor economy is likely to exert a negative impact not only on exports but also on domestic demand via income channels. This slowdown may lead to deteriorating tax revenue conditions in 2023-2024. - However, given the relatively modest employment multiplier effect of the semiconductor industry, the repercussions on the labor market are expected to be minimal. ■ Elevating the share of the non-memory sector could contribute to reducing economic fluctuations. In addition, concerted efforts are needed to mitigate the spillover effect of intensifying geopolitical risks in recent times. - Acknowledging the growing macroeconomic significance of the semiconductor industry, the recent diversification towards increasing the investment in the non-memory sector can be viewed positively from a standpoint of economic stability. - Conversely, the semiconductor industry's high susceptibility to geopolitical risks, particularly in the context of the escalating US-China conflict, underscores the critical need to strengthen industrial, trade, and diplomatic leadership strategies to mitigate uncertainties in associated sectors.

■ The analysis results show that the recent decline in the current account balance was driven by a sustained increase in expenditure despite a decline in income due to deteriorating external conditions. - The decline in the current account in 2H 2022 was largely due to a decrease in income caused by the decline in the terms of trade, with some contribution from domestic demand. - In 2023, the current account surplus is expected to narrow to 1.0% of GDP as domestic demand maintains a relatively high increase amid the persistent global economic slowdown. ■ Given the current status of external soundness of the Korean economy, a sharp contraction in the foreign exchange market due to a decline in the current account is unlikely to occur. - Currently, Korea’s foreign exchange reserves and net foreign assets are significantly different in size from those of countries that have experienced foreign exchange crises in the past, and even if the current account decline persists for one or two years, the likelihood of a foreign exchange crisis due to a decline in net foreign assets appears to be low. ■ Therefore, it is advised that the macroeconomic policy stance should not be sensitive to short-term fluctuations in the current account. - It is important to note that the narrowing of the recent trade deficit may not guarantee macroeconomic stability. - Consequently, when assessing the current situation and setting a policy framework, it is necessary to pay close attention to indicators closely related to macroeconomic conditions, such as prices, economic activity, and employment, rather than short-term fluctuations in the current account.

■ The rate hike has contributed to the reduction in housing prices and starts and is anticipated to result in a decline in future housing construction, ultimately weakening economic growth. - The analysis found that the decline in housing starts, due to high interest rates, is projected to hinder economic growth by 0.3%p in 2023 and 0.4%p to 0.5%p in 2024. ■ Recent rate hikes are intentionally designed to control inflation by managing economic growth at a slower pace, with the decline in the housing economy being understood as part of that process. - The current tight monetary policy stance aims to stabilize inflation despite the broader economic slowdown. - With low-interest rates in 2020 and 2021, real transaction prices of apartments soared by 16.7% and 18.1%, respectively, and are now entering a correction period. - With the recent timing of rate hikes, the housing market encountered credit crunches centered on real estate PFs, exacerbating the challenges faced by construction companies. However, the need for policy response is not urgent unless the risk of a financial system crisis escalates. ■ Nevertheless, if housing construction stays contracted for a significant period of time in the future due to the recent decline in housing prices, a shortage of housing supply may arise, necessitating ongoing efforts to enhance housing supply resilience to demand changes. - Housing supply takes considerable time, and mismatches between supply and demand often occur. It is essential to create conditions that can support housing supply, such as through public residential sites preparation, when housing demand begins to recover. - Simultaneously, due to rising construction costs, construction companies and homeowners' associations frequently engage in conflicts, causing delays in construction. Relevant systems must be overhauled for improvement to ensure construction projects are executed as planned.

■ Rising interest rates disproportionately lowered consumption among young adults compared to middle-aged and older adults, with larger decreases observed for young adults with higher levels of debt, lower income, or weaker credit ratings. - Those in their 20s reduced their consumption by approx. 299,000 won (1.3%), which is 8.4 times larger than the decrease of 36,000 won (0.2%) among older adults in their 60s. - Young adults with debt in the top half experienced a consumption decrease (264,000 won, 1.1%) that was about 11 times greater than that of those without debt (24,000 won, 0.1%). - Among the top 50% of debt-burdened young adults, those with low credit scores (700 and below) reduced their consumption by a noteworthy 539,000 won (2.2%) per year for a 1% increase in the base rate. ■ Policy makers should continue their efforts to assist younger borrowers in managing their debts at sustainable levels. - Loan regulations, such as DSR, should account for the current and future income of young adults, considering their potential income growth over the life cycle. - Since a considerable share (around 85%) of young adults’ debt is tied to housing, concurrent policy efforts to stabilize housing costs are crucial for managing their debt in a sustainable manner. ■ It is essential to offer young borrowers in marginal situations additional opportunities to refinance their existing debt into longer-term amortizing loans. This can help alleviate their debt burden, enabling them to gradually repay their obligations over an extended period of time. - Given the lengthy remaining work period of young adults, facilitating debt repayment over an extended period could mitigate the risk of a sudden deterioration in debt structure. This approach would help prevent precarious financial behaviors, such as engaging in a ‘rob Peter to pay Paul’ strategy.