The South Korean economy is highly dependent on international trade, with close to half of GDP accounted for by exports. Vehicle, smartphone, electronics and shipbuilding sectors have been impacted by slowing conditions in global trade, weaker trade with China, a downturn in global shipping and less investment in shipbuilding and oil and gas equipment.
Record low interest rates saw a strong increase in residential investment during 2016. Both building and civil construction expanded during 2016 but increased fears of increased borrowing costs as the US plans to ease off on quantitative easing applied the brakes at the end of the year.
Non-residential projects are being impacted by the negative export trade outlook, as difficult trading conditions continue in the shipbuilding and shipping sectors.
The future of South Korea’s economy remains steady; confidence should improve slowly in 2017 after recent difficult political and trading conditions impact on the economy.
Given South Korea’s high reliance on exports, there are significant concerns relating to the possibility of increased US trade protectionism. Nevertheless, the government has considerable reserves and room for stimulating the economy, which may become necessary should difficult conditions continue.