(Ministry of Economy and Finance)
South Korea’s economy is expected to expand by more than 2 percent this year despite the impact of the Middle East conflict, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said on Monday.
“The real gross domestic product (GDP) growth rate for the first quarter came in at 1.7 percent, far exceeding market expectations,” Koo told reporters at the government complex in Sejong. “Major investment banks have recently been revising upward their forecasts for Korea’s growth this year.”
He added, “How much above 2 percent growth we achieve will depend on factors such as the semiconductor boom and the impact of the Middle East conflict.”
He noted that a more detailed forecast will be announced in June as part of the economic growth strategy for the second half of the year.”
Regarding the Kospi recently surpassing the 7,800 level, Koo noted that it is “still at a low level.”
He cited statistics based on the price-to-book ratio (PBR), noting that the Korean stock market remains undervalued compared with advanced economies.
“Kospi has continued to rise after surpassing its all-time high above 7,000, and in terms of market capitalization, Korea has moved up six places – from 13th to 7th globally – since the launch of the current administration,” Koo said.
He added that global investors are betting on Korean stocks as the semiconductor boom is expected to continue through at least next year.
Asked whether the government could revisit the financial investment income tax amid the stock market rally, Koo said the tax was abolished in 2024 and any future discussion would depend on broader capital market conditions.
Korea had planned to impose the tax on gains from financial investments exceeding 50 million won ($33,900) before scrapping the measure.
Separately, Koo said the government plans to resell 1.02 trillion won worth of shares to NXC Corp., the holding company of Nexon Group, from shares it acquired as payment in kind for inheritance taxes following the death of Nexon founder Kim Jung-ju.
The shares were originally valued at 5.53 million won each when accepted by the government for tax payment purposes, while the resale price is set at 5.56 million won per share, above their original assessed value.
The government’s stake in NXC will fall to 25.7 percent from 30.6 percent following the sale.
The government said NXC’s repurchase, financed largely with overseas foreign-currency funds, would help stabilize the foreign exchange market while also boosting government finances through additional non-tax revenue.
NXC is expected to cancel the repurchased treasury shares as treasury share cancellations are now mandatory under the Commercial Act.
Koo said the government’s second-half economic strategy would include policies on supply chains, energy security and economic transformation in response to the war in the Middle East, while seeking new growth drivers beyond semiconductors and advancing structural reforms to boost long-term growth potential.
“The period from the second half of this year through next year will be a critical window for structural reform aimed at boosting growth potential,” Koo said. “We will step up economy-related ministerial meetings to address fundamental structural issues.”
On a labor-management dispute at Samsung Electronics Co. over bonus payments, Koo urged both sides to reach an amicable settlement amid the semiconductor boom.
Asked whether the won could weaken further beyond 1,470 per dollar, Koo said the exchange rate is determined by the market.
“Overall, Korea is not facing a shortage of foreign currency,” he said.
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