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Economic Outlook KDI ECONOMIC OUTLOOK | UPDATE 2026.08

The Korean economy is projected to grow by a strong 3.2% in 2026, supported by favorable conditions in the global semiconductor market, and by 2.2% in 2027.

August 19, 2026
KDI NEWS World Bank-KDI GKEDC Capacity-Building Program on State-Owned Enterprises (SOEs)

KDI GKEDC, jointly with the World Bank (WB), successfully hosted a training program from July 13 to 17 to share Korea's policy experiences and support the successful state-owned enterprise (SOE) reform of the Cambodian, Lao, and Malaysian governments.

August 27, 2026
Other Research KOR KDI Review of the North Korean Economy, August 2026

The August issue examines new research methods developed to address the persistent scarcity of reliable information and official statistics on North Korea.

August 31, 2026
KDI News 「2026 International Conference on Economic Education: Reconstructing Economic Education in the AGI Era」 Held

The Ministry of Finance and Economy and KDI successfully hosted the "2026 International Conference on Economic Education," providing over 300 participants with practical insights into new directions for economic education in the AI era.

July 22, 2026
KDI FOCUS Shifting Mandatory Closures to Weekdays: Implications for Retail Policy

Considering regional conditions and the recent retail environment characterized by active shifts in consumption between online and offline channels, there is a need to more actively consider shifting mandatory closing days to weekdays.

August 27, 2026
KDI News KDI-IDOS Joint Seminar on Middle Powers in the Future Global Development Agenda

On June 25, 2026, KDI and IDOS discussed "Exploring the Role and Responsibility of Middle Powers in the Future Global Development Agenda."

June 25, 2026
Economic Bulletin Economic Bulletin, August 2026

In May, total industrial production decreased, while retail sales increased. In June, the growth in the number of employed persons rebounded, and consumer price growth accelerated from the previous month.

August 01, 2026
KDI News KDI-National Economic Advisory Council Policy Forum on “Key Strategies for Genuine Growth in the AI Era”

On August 31, KDI and the National Economic Advisory Council (NEAC) jointly hosted a policy forum to discuss Korea’s growth strategies and policy priorities in the AI era.

September 09, 2026
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Analysis on critical pending issues of the Korean economy
to enhance public understanding of the economy and provide useful policy alternatives

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Summary

KDI FOCUS Online Retail Growth and Reforming Korea’s Retail Policy
Amid the robust expansion of online retail, the retail sector has shown a conspicuous divergence: hypermarket sales have decreased due to competition from online channels, whereas smaller formats like SSMs and convenience stores have expanded by capturing distinct, proximity-based demand. This asymmetrical outcome underscores the need to reform the Distribution Industry Development Act, shifting away from current hypermarket restrictions toward a framework that bolsters the competitiveness of brick-and- mortar retailers and addresses the regulatory imbalances between online and offline channels. - The rapid growth of online retail has widened the gap between the market the Distribution Industry Development Act was designed for and today’s retail reality. - The current regulatory framework, still designed around offline retail, is undermining both fairness and efficiency across the retail sector. - Online retail has expanded rapidly, driven by competitive pricing, a wider range of products, and logistics advancement. - Online retail, once a supplementary channel, has become a core pillar of the retail industry. - The expansion of online retail is exerting competitive pressure on traditional offline retailers, particularly hypermarkets. - The explosive growth of Coupang, which built its name on Rocket Delivery, brings efficiency gains and consumer benefits, but also risks reducing competition. - Although online retail expansion was expected to reduce offline sales through a businessstealing externality, the analysis shows that higher online spending is associated with higher offline sales. - Offline retail expansion driven by online growth occurs primarily through quantitative expansion, such as increases in the number of establishments and consumers. - While online expansion erodes hypermarket sales, it drives market growth for proximitybased retailers, such as SSMs, convenience stores, and other specialized retailers. - Higher online spending may stimulate latent consumer demand and broaden the overall retail market. - Higher online spending may encourage new business entry and customer inflows among neighborhood-serving offline retailers. - Policy discussions should move beyond the zero-sum assumption that equates online retail expansion with offline retail contraction. - Rocket Delivery has reduced visit frequency at offline retailers, though its aggregate impact remains limited. - The offline-oriented Distribution Industry Development Act should be revised to remedy the regulatory asymmetry between online and offline channels. - Policy support should help traditional markets and offline retailers strengthen their local consumer base and expand product offerings that online channels cannot easily replicate. - Advances in logistics infrastructure should be continuously monitored, with the findings promptly reflected in retail policy. - Abuse of superior bargaining position by online platforms should be actively curbed to promote fair competition.

Summary

KDI FOCUS Online Retail Growth and Reforming Korea’s Retail Policy
Amid the robust expansion of online retail, the retail sector has shown a conspicuous divergence: hypermarket sales have decreased due to competition from online channels, whereas smaller formats like SSMs and convenience stores have expanded by capturing distinct, proximity-based demand. This asymmetrical outcome underscores the need to reform the Distribution Industry Development Act, shifting away from current hypermarket restrictions toward a framework that bolsters the competitiveness of brick-and- mortar retailers and addresses the regulatory imbalances between online and offline channels.

- The rapid growth of online retail has widened the gap between the market the Distribution Industry Development Act was designed for and today’s retail reality.

- The current regulatory framework, still designed around offline retail, is undermining both fairness and efficiency across the retail sector.

- Online retail has expanded rapidly, driven by competitive pricing, a wider range of products, and logistics advancement.

- Online retail, once a supplementary channel, has become a core pillar of the retail industry.

- The expansion of online retail is exerting competitive pressure on traditional offline retailers, particularly hypermarkets.

- The explosive growth of Coupang, which built its name on Rocket Delivery, brings efficiency gains and consumer benefits, but also risks reducing competition.

- Although online retail expansion was expected to reduce offline sales through a businessstealing externality, the analysis shows that higher online spending is associated with higher offline sales.

- Offline retail expansion driven by online growth occurs primarily through quantitative expansion, such as increases in the number of establishments and consumers.

- While online expansion erodes hypermarket sales, it drives market growth for proximitybased retailers, such as SSMs, convenience stores, and other specialized retailers.

- Higher online spending may stimulate latent consumer demand and broaden the overall retail market.

- Higher online spending may encourage new business entry and customer inflows among neighborhood-serving offline retailers.

- Policy discussions should move beyond the zero-sum assumption that equates online retail expansion with offline retail contraction.

- Rocket Delivery has reduced visit frequency at offline retailers, though its aggregate impact remains limited.

- The offline-oriented Distribution Industry Development Act should be revised to remedy the regulatory asymmetry between online and offline channels.

- Policy support should help traditional markets and offline retailers strengthen their local consumer base and expand product offerings that online channels cannot easily replicate.

- Advances in logistics infrastructure should be continuously monitored, with the findings promptly reflected in retail policy.

- Abuse of superior bargaining position by online platforms should be actively curbed to promote fair competition.

Summary

KDI FOCUS Shifting Mandatory Closures to Weekdays: Implications for Retail Policy
This study finds that shifting mandatory closing days to weekdays increased hypermarket sales across the regions examined, without a corresponding decline in other offline retail formats such as traditional markets. The gains appear to reflect a shift of consumer spending from online to offline channels rather than reallocation within the offline sector. The mandatory closure policy has long rested on the assumption that offline retailers compete primarily with one another, hence its traditional focus on weekends. Given the growing fluidity of spending between the two channels and the wide variation in local market conditions across regions, the weekday shift should be actively explored.

- It is time to reassess whether the mandatory closure policy still fits the changed retail environment.

- This study examines how moving mandatory closing days to weekdays affected sales across retail formats.

- Since the mid-2010s, hypermarket sales have shifted into decline, while convenience stores and SSMs have continued to expand.

- The rapid growth of online retail is tilting Korea’s retail market away from offline stores and toward online platforms.

- Since 2023, Daegu, Seoul, and Busan have been at the forefront of the weekday shift.

- The shift to weekday closures now covers 30 municipalities and over 300 stores.

- The shift to weekday closures varies across municipalities, reflecting local conditions and policy judgments.

- This study identifies the policy effects by exploiting differences in the timing of weekday closure adoption across municipalities.

- After the weekday shift, hypermarket sales rose consistently across major regions―up 4.7% in Daegu, 2.8% in Seoul, and 6.2-7.9% in Busan.

- By expanding consumer choice and convenience, the weekday shift appears to have led to higher hypermarket sales.

- Sales gains at modern large-format retail and tenant retailers suggest that the foot-traffic effect of hypermarkets can extend to co-located stores and neighboring commercial districts.

- Following the shift to weekday closures, no clear evidence of sales declines emerged in household goods and grocery retail or in agricultural, livestock, fisheries, and traditional retail across most regions studied.

- Where hypermarkets and traditional markets serve different consumer needs, a rise in hypermarket sales following the weekday shift may not lead to a decline in traditional market sales.

- Following the weekday shift, online spending fell by 2.6-3.7% among consumers in their 20s-40s.

- The decline in online spending was relatively pronounced among consumers in their 40s, an age group with a high share of dual-earner households and families with children.

- Given the changed retail environment, local governments should actively explore the shift to weekday closures.

- When exploring the weekday shift, local governments should treat weekend spending concentration and the share of online shopping as key criteria.

- Discussion of the weekday shift should move beyond simple deregulation to consider how local retail ecosystems can generate mutual benefit.

Summary

KDI FOCUS Eldercare Workforce: Projections and Policy Implications
Operating beyond the super-aged threshold, Korea faces deepening shortages in its eldercare workforce as the sector struggles to attract workers. While better job quality is imperative to expand this workforce and maintain the quality of life for older adults, incentives for domestic workers alone will not close the gap. Visa policy needs to change to bring in foreign care workers, and care robot technologies should be actively deployed to raise labor productivity in the sector.

- Demand for formal eldercare services is expected to rise sharply, with workforce shortages deepening in step.

- Demand for LTC services is projected to increase by more than 2.4 times between 2023 and 2043.

- Health improvements offset demand only modestly. The growing 85+ population will drive faster growth in high-intensity care (Grades 13).

- The supply of LTC workers is projected to peak at 806,000 in 2034 before declining.

- The share of care workers aged 60 and over is expected to rise from 63.1% in 2023 to 72.6% in 2043, reflecting an increasingly aged workforce.

- Holding the 2023 caseload per care worker constant would require an additional 990,000 workers by 2043.

- Differences in the pace of aging across regions will widen disparities in the number of beneficiaries per care worker.

- Foreign care workers comprised just 0.9% of the total workforce in 2023, a marginal presence in the sector.

- With 56.6% of foreign care workers aged 60 or over and 77% concentrated in the SMA, their capacity to mitigate workforce aging and regional supply disparities remains highly constrained.

- Visa policy for foreign care workers should shift to occupation-specific visas with managed aggregate inflows, guided by the extent to which better job quality can expand the domestic workforce.

- Applying current EPS service-sector quotas to care facilities would permit up to 63,000 foreign workers.

- The E-7 care worker visa pilot should be expanded in scale, alongside efforts to secure sufficient enrollment for the associated training program.

- Attracting domestic workers and retaining recruited foreign careworkers both require better job quality.

- Targeted incentives are needed to encourage employment in underserved regions and ease supply-demand imbalances.

- Care robot uptake in Korea remains low, with just 6.4% of surveyed facilities deploying them.

- The main reason for deploying care robots is to ease the physical burden on care workers; adopters report workload reductions of more than half in some cases.

- Cost is a key barrier to adoption: 51.8% of care facilities would deploy care robots if cost subsidies were provided.

- Care robot policy should expand beyond its developer-centered focus to include support for care facilities, promoting wider adoption in frontline care settings.

Summary

KDI FOCUS Rebuilding Scale-up Support Policies: Toward an Integrated Framework
As firms rapidly lose dynamism beyond the early stage, resolving their growth bottlenecks has emerged as a critical policy priority. Empirical analysis shows that successful scale-up is closely tied to R&D investment, AI adoption, and exports in manufacturing, whereas brand strength and design capabilities are key drivers in services. This highlights the limitations of single-track, R&D-centric support and the greater effectiveness of coordinated policy mixes based on firm-specific growth bottlenecks. Achieving this requires pivoting toward a more effective model―one that brings scale-up programs under integrated management and overhauls the performance evaluation framework.

- The core of an economic growth strategy lies in firm growth, yet business dynamism in Korea has weakened markedly.

- While HGFs are key drivers of growth and job creation, their share in the Korean economy is declining, with scale-up firms showing a sharp contraction in activity.

- Turning the government’s growth strategy into concrete action is emerging as a key priority.

- A higher share of HGFs within an industry is positively and significantly associated with aggregate productivity growth, accompanied by improvements in average
firm productivity and allocative efficiency.

- Given the recent decline in HGF activity, the potential link to the slowdown in industry productivity growth warrants close examination.

- Effective scale-up policy requires a solid grasp of what drives firms to achieve high growth.

- Productivity improvement is a key driver of high growth, but the factors at work differ across industries. Reliance on a single instrument such as R&D support risks
limiting overall policy effectiveness.

- The system should shift to a one-stop model that identifies growth bottlenecks before firms apply for individual programs and rapidly designs, integrates, and delivers the most effective combination of existing policy instruments and private sector services.

- Private-sector engagement should be voluntary by default. Direct public support through vouchers or performance-linked mechanisms is warranted only in cases of market
failures or urgent needs, with provider evaluation in place to control quality and guard against moral hazard.

- Firms with urgent growth bottlenecks should be placed on the Fast Track, with simplified procedures and prioritized access to private-sector services.

- The government should streamline and integrate the management of scale-up support programs and establish a performance management framework linked to tangible firm growth and capability development.

Summary

KDI FOCUS Why the Capital Region Keeps Growing: Urban Accounting and Spatial Policy Implications
Population concentration in the Seoul Metropolitan Area has continued unabated since the 1970s. In the 2010s, diverging productivity drove this trend―gains in semiconductor and knowledge-based sectors in the capital region versus losses in manufacturing-oriented regional cities. Planned city projects, including Sejong, heavily prioritized infrastructure provision, yielding limited productivity growth and only modest population inflows. To achieve balanced development, spatial policy should move beyond infrastructure investment to boosting regional productivity. Furthermore, narrowing the divide between the capital region and outer regions may necessitate accepting some disparities within outer areas.

- Despite three decades of balanced national development plans, SMA concentration has intensified unabated.

- Cities draw population by providing both economic and non-economic advantages.

- Cities cannot grow indefinitely, as congestion intensifies with expansion.

- City size increases as productivity and amenities rise and accommodation costs fall.

- Through population mobility, local changes in city characteristics spill over nationwide.

- Productivity in the SMA not only exceeded non-SMA levels but also grew at a faster rate.

- Amenities were consistently higher in non-SMA regions, a pattern strengthened over 15 years.

- Urban accommodation costs were substantially lower in the SMA, only marginally narrowing the regional gap.

- The SMA’s growing productivity advantage drove further concentration toward the region from 2005 to 2019.

- Reversing the concentration toward the SMA remains elusive without closing the regional productivity gap.

- Industrial restructuring in the 2010s led to productivity declines in non-SMA industrial cities.

- Without the productivity decline in non-SMA industrial cities, concentration toward the SMA would have been moderated.

- Had productivity in the industrial cities grown at the national average rate, it could have reversed the trend of SMA concentration.

- Substantial productivity gains in regional hubs are essential to reduce the SMA population share.

- Productivity gains achieved through fiscal investment involve high uncertainty and therefore require a cautious, selective approach.

- SMA concentration since the 2000s has been closely tied to its growing relative productivity advantage.

- Substantial regional productivity gains can meaningfully offset SMA concentration.

- Spatial policy should pivot from infrastructure provision toward driving tangible regional productivity gains.

- Restructuring regional spatial configurations around large hubs can help reduce the gap with the SMA.

- Central coordination is crucial for policy efficacy, and decentralization must be aligned with resource allocation efficiency.

Summary

KDI FOCUS Declining Cognitive Skills among Korean Workers: Drivers and Improvement Measures
Strengthening workforce competencies and labor productivity has become increasingly important amid rapid advances in automation and industrial transformation. However, international comparative findings show that the cognitive skills of Korean workers decline steeply with age, raising concerns about labor productivity. While multiple factors contribute to this decline, the primary driver appears to be a wage structure that provides insufficient incentives for skills development. To promote labor productivity growth, wage systems based on skills and performance need to be expanded, alongside the provision of broader opportunities for upskilling and reskilling.

- Adapting to advances in AI and evolving job tasks requires raising labor productivity through broad-based improvements in workers’ cognitive skills.

- The cognitive skills of Korean workers have not only declined over the past decade but also exhibit an unusually rapid depreciation with age, raising concerns regarding both labor productivity and the effective utilization of older workers.

- Skill depreciation among Korean workers is marked by (1) an early onset in young adulthood and (2) an exceptionally rapid decline with age.

- Factors contributing to the rapid age-related decline in cognitive skills appear to include limited opportunities for skill development in adulthood: long and rigid working hours, ineffective learning and training programs, and workplace environments that prevent workers from developing skills.

- The absence of wage systems that incentivize voluntary skill development is suggested as a key factor behind Korea’s rapid skill decline.

- For Korean workers, the expected wage return to cognitive skills is roughly half the level observed in OECD peers such as Germany, Japan, and the United States, leaving weak incentives for voluntary upskilling.

- Korea’s wage structure (1) places substantially greater weight on tenure than on competencies and (2) exhibits large wage differentials by firm size.

- This wage structure weakens incentives for post-entry skill development while intensifying inefficient credential competition for early-career entry into large firms.

- Broader adoption of skill- and job-based pay systems is needed to strengthen incentives for workers to develop their skills.

- Workers should be given meaningful opportunities to build their skills through greater autonomy over working hours, more effective learning and training programs, and workplace environments that enable full use of their competencies.

Summary

KDI FOCUS Drivers of the Growth of Marginal Part-Time Work and Policy Recommendations
Marginal part-time work has risen rapidly in South Korea’s labor market, driven by a policy structure in which labor costs increase sharply at 15 hours per week. Policy adjustments are needed to moderate the excessive cost differential at a specific working-hour threshold.

- Among wage workers, the share of marginal part-time workers―defined as those working fewer than 60 hours per month―more than doubled, rising from 3.7% in 2012 to 8.5% in 2024.

- Social insurance coverage remains low for marginal part-time workers, with few signs of improvement.

- The rapid expansion of marginal part-time work means that jobs outside the worker protection framework are increasing, calling for policy attention.

- Because many worker protection schemes apply only to workers with contractual hours of 60 or more per month, marginal part-time work falls within a blind spot of the worker protection framework.

- The cost discontinuity at 60 hours per month creates incentives for employers to hire marginal part-time workers.

- Since the 2010s, compliance with worker protection schemes for workers employed at least 60 hours per month has improved.

- Improved compliance with worker protection schemes has stimulated the expansion of marginal part-time work.

- Improved compliance with worker protection schemes is empirically correlated with the expansion of marginal part-time work and explains a substantial share of that increase.

- Improved compliance with worker protection schemes may reflect greater public awareness and understanding of these schemes.

- The labor market structure with a sharp cost discontinuity at 60 hours per month warrants adjustments.

- While revisiting the weekly holiday allowance is necessary to mitigate the cost differential that encourages both marginal part-time work and long working hours, adjustments should be framed as a longer-term objective and pursued
cautiously.

- The following principles should guide the formulation of a policy mix: set eligibility criteria in light of the overall cost structure; proceed gradually and combine policy measures to mitigate adverse effects; avoid placing disproportionate adjustment costs on specific groups; and conduct sufficient social dialogue and institutional review.

Summary

KDI FOCUS Enhancing the Prudential Framework for Securities Firms
Despite increasing risk exposure from expanding assets and leverage among large securities firms, the current Net Capital Ratio (NCR) framework does not adequately capture these risks. To strengthen risk sensitivity while maintaining a balance between financial soundness and industry growth, the NCR formula for large securities firms should revert to its pre-2016 structure, and a differentiated regulatory approach tailored to business scope and risk characteristics should apply to small- and medium-sized firms.

- As securities firms continue to grow rapidly in both asset size and functional scope, concerns have been raised that the current NCR framework may not adequately reflect the risks associated with this expansion, potentially creating regulatory gaps with implications for financial stability.

- The IMA system, scheduled for end-2025, is expected to expand short-term funding capacity at large securities firms, potentially reinforcing further growth in asset size and market influence.

- The March 2020 margin call episode provides a clear illustration of how prudential vulnerabilities at securities firms can propagate across the broader financial system.

- Led by large securities firms, assets and leverage have expanded rapidly, accompanied by increased derivatives investment and growing reliance on shortterm funding instruments, including RP and shortterm notes.

- In 2016, Korea revised the NCR formula, shifting the prudential orientation for securities firms from agoing-concern to a goneconcern basis.

- Under the current NCR framework, rising leverage is not adequately reflected in the indicator, weakening its role as a warning signal.

- The systemic importance of large securities firms has steadily increased alongside their expanding assets and leverage.

- To accurately reflect the risks associated with asset and leverage expansion at large securities firms, the NCR formula should return to “net operating capital ÷ total risk.”

- Regulatory intensity should vary with firm size and business characteristics to balance financial stability with market dynamism.

- As the scale and functional scope of securities firms expand, NCR reform should be the starting point for broader regulatory reforms to preempt the excessive accumulation of systemic risk.

Summary

KDI FOCUS Improving Regulations on Abuse of Superior Bargaining Position by Digital Platforms
Applying the current regulatory framework for abuse of superior bargaining position to abusive conduct (gapjil in Korean) by digital platforms presents two key challenges: identifying harmed parties (victims) and incorporating efficiency considerations. Requiring the identification of each harmed party imposes significant procedural burdens in handling platform abuse cases and may be inadequate to remedy actual harm. In addition, given the intermediary nature of platform services, unfair trading practices may yield direct benefits for other user groups besides victims. Therefore, it is necessary to improve the relevant systems to reduce the burden of identifying victims and to examine possibilities for efficiency gains.

- Concern over platform abuse runs high, yet regulatory frameworks premised on the superior bargaining position of traditional firms fail to capture the inherent nature of platform businesses, which generate both economic harm and efficiency gains.

- Discussions on platform regulation have increasingly focused on ex-ante solutions. However, given the complementarity between new and existing frameworks, strengthening ex-post enforcement against abuse of superior bargaining positions remains crucial to reflect the distinctive characteristics of digital platforms.

- In assessing superior bargaining position, key factors are the extent of dependence by the counterparty (Party B) on the superior firm (Party A) and disparities in their scale or capacity.

- The superior data capabilities of digital platforms increase the potential for abuse of superior bargaining position.

- The rapid pace of market change amplifies the risk of abuse through expanding monopsony power.

- Conversely, the smaller scale of platform-specific investment mitigates the risk of abusing bargaining position.

- Whereas market-dominant position is absolute, allowing firms to change trading terms regardless of counterparties, bargaining position is relative, varying with counterparties.

- Earlier rulings under the Large Retail Business Act imposed a lighter burden in identifying counterparties(Party B) when establishing a superior bargaining position, but the Seoul High Court has recently required individual specification of harm for each victim.

- For platforms, the authority to set and revise transactional rules substantially amplifies the potential for abusing their bargaining position through changing trading terms, but their role as general rulesetters limits their ability to exploit counterparties individually.

- Mandating the specification of Party B in cases involving abuse of a superior bargaining position by platforms is misaligned with the economic realities of platforms with general rule-setting authority.

- The intermediary role of platforms broadens the scope of direct stakeholders in platform transactions, creating the possibility that conduct seemingly exploitative toward certain users may instead yield direct and substantial benefits for users on the opposite side or in related positions.

- Because abuse of superior bargaining position by platforms can cause widespread harm across many parties, the burden of identifying harmed parties should be eased when common circumstances among them are sufficiently established.

- When harm among users becomes widespread, regulation should consider the impact on the trade practice to ensure that it reflects real economic conditions.

- Given the possibility for directly affected third parties to benefit from abusive practices by platforms, efficiency-enhancing effects should be examined during case review.

- Because the authority of platforms to set and revise general rules endows the absolute dominant position, it will be necessary to shift toward regulating
abuses of market-dominant positions in the long term.

Summary

KDI FOCUS Korea’s Trade Structure since 2010 and Implications for Economic Security
Recent shifts in Korea’s trade structure are characterized by a broad-based rise in imports from China and a concentrated expansion of exports to the United States in a small set of products, resulting in deeper bilateral trade dependence with both economies. These structural shifts introduce multiple risks, including supply chain vulnerability, job losses in sectors competing with Chinese imports, exposure to U.S. protectionism, and macroeconomic instability. Proactive trade diversification through coordinated policies and targeted export promotion initiatives is essential, alongside institutional reforms to shield affected industries and workers. This agenda should remain a policy priority even after the current trade negotiations with the U.S. are concluded.

- Responses to U.S. tariffs dominate attention while Korea’s shifting trading structure remains overlooked.

- Korea’s recent trade features a shift to a deficit with China, a growing surplus with the U.S., and rising dependence on both.

- Korea’s trade balance deterioration with China stems from net import growth in broad manufactured products, while its U.S. trade surplus expansion is driven by exports of a few products, including automobiles and semiconductors.

- Korea’s import and export shifts have elevated its country-level import concentration and product-level export concentration above other major economies.

- Technological, industrial, and policy shifts of the U.S. and China, alongside their escalating geopolitical tensions, continue to shape Korea’s trade patterns.

- Rising supply chain dependence on China poses the risk of negative spillover effects not only on Korea’s current key industries but also on future strategic ones.

- Intensified competition from Chinese imports raises concerns about employment declines and deteriorating job quality in Korea’s manufacturing sectors.

- Korea’s export growth to the U.S., concentrated in a few products, increases the likelihood of becoming the target of U.S. tariff measures.

- Deepening trade dependence on a few countries and products may increase macroeconomic instability.

- Export and import diversification calls for stronger national economic diplomacy and trade cooperation, alongside accelerated CPTPP accession.

- Expanded support is needed for export and import firms to diversify trading partners and product portfolios, prioritizing policies with proven effectiveness.

- Protecting domestic industries calls for stronger monitoring and response systems for unfair trade practices, alongside assistance that helps affected firms and workers adapt swiftly to the changes.