South Korea is the fourth largest economy in Asia, attracting a number of our clients. South Korea is home to many world-class companies employing cutting-edge technology in the production of everything from mobile phones to ships, which are exported globally. Open trade policies gives the country access to international markets, which has been further advanced by the many free trade agreements the Korean government has signed.

We keep our clients informed of the latest market moves and political developments in South Korea as part of our 'top-down' and 'bottom-up' perspective. Clients also benefit from in-depth analysis on 21 of the country’s most important industries. We provide interactive data and forecasting alongside detailed and risk-assessed analysis from our expert research teams. We aim to keep you ahead of the curve in South Korea, so business is made easy.

South Korea Country Risk

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Core Views

  • Outgoing UN Secretary-General Ban Ki-moon is emerging as the de facto frontrunner for South Korea's December 2017 presidential election, as the conservative ruling Saenuri and centre-left liberal parties are struggling to find plausible candidates amid severe internal rifts. Meanwhile, President Park Geun-hye's deteriorating relationship with Saenuri is accelerating her descent to lame duck status, which will impede her ability to pass economic reforms and host the US's THAAD missile defence system.

  • We are downgrading South Korea's 2016 real GDP forecast slightly to 2.6% from 2.8% previously despite the economy's stronger than expected expansion of 3.0% in H116. This is to reflect mounting headwinds from the restructuring of the shipbuilding industry and the spillover effect this will have on the broader economy. In addition...

South Korea Operational Risk Coverage (9)

South Korea Operational Risk

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BMI View: South Korea offers an accommodating operational risk climate to businesses and investors due to its strong logistics networks, highly developed labour market and attractive trade and investment environment. Security risks emanating from North Korea somewhat depress the overall score; however, strong military support from the US reassures investors. Consequently, South Korea scores 68.2 out of 100 in the overall BMI Operational Risk Index, ranking it fifth out of 35 states in the Asia region and 26th out of 201 countries on a global comparison...

South Korea Crime & Security

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BMI View: South Korea's operating environment is generally characterised by significant levels of security and stability, minimising risks to businesses and investors. The country's low crime rate and minimal terrorist threats increase its attractiveness, while strong policing and military security organisations maintain domestic order and international protection. However, the constant threat of aggression from North Korea dampens South Korea's overall security prospects, with regular prolonged periods of heightened tensions leading to increased risk of miscalculation or belligerence leading to full-scale conflict. In the meantime, high numbers of cyberattacks from across the border threaten to disrupt South Korea's sophisticated internet infrastructure and the core operations of individual businesses. Finally, South Korea's history of organised crime gangs continues, with numerous...

South Korea Labour Market

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BMI View: South Korea's labour market is reasonably well suited to attract foreign businesses. It boasts a high level of education and employable skills amid reasonably high unemployment. This means there are a large number of educated, skilled labourers seeking work, representing a significant opportunity for employers. However, major risks involve a shrinking labour force - the result of an ageing population - and the limitations and pressure placed on South Koreans by the rigid education system. Overall, South Korea receives a Labour Market Risk score of 63.7, placing it fourth out of 35 states...

South Korea Logistics

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BMI View: South Korea boasts a sophisticated and well-integrated logistics network which facilitates efficient supply chains and a relatively reliable utilities supply for the country's major industries. The export-driven economy is set to record healthy growth over the medium term, and investment in the transport network will improve already-strong international connections and enable it to cope with expanding trade volumes. South Korea is therefore a global outperformer in the overall BMI Logistics Risk Index, with a score of 76.4...

South Korea Trade & Investment

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BMI View: Open trade and investment policies have facilitated South Korea's development into an important hub for international trade and FDI, driving industrial production and economic growth. The country consequently offers a highly conducive environment for foreign investors, particularly in its advanced manufacturing industry. The financial sector provides strong international connections and good availability of credit to businesses and consumers. The investment climate is also augmented by South Korea's moderate tax rates, which may be reduced by incentive programmes, efficient bureaucracy and strong rule of law. Some concerns remain over comparatively elevated tariff barriers to trade and restrictions on foreign involvement in certain sectors; however, these are offset by South Korea's extensive development of special economic zones and a broad...

South Korea Industry Coverage (21)

South Korea Agribusiness

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BMI View: The South Korean agricultural sector holds a modestly subdued outlook over our forecast period. The livestock industry has been plagued by various disease outbreaks in the past that have largely been contained since. Government-led efforts will benefit the industry over the longer term and help it to remain relevant. These include the expansion of education and financial support for farmers to allow them entry into the food processing business; plans to modernise traditional methods of food production; the creation of new agricultural food districts for exporters and the introduction of state designation of food...

South Korea Autos

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BMI View: Despite external headwinds dragging on total vehicle sales in 2016, passenger vehicles sales and commercial vehicles sales are forecast to grow 1.5% and 2.4% respectively. This in turn will drive total vehicle sales to grow 1.7% in 2016, and at an annual average of 2.8% over our forecast period.

Total Vehicle Sales To Remain Positive Despite External Headwinds
Total Vehicle Sales By Segment
f = BMI forecast. Source:...

South Korea Commercial Banking

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Commercial Banking Sector Indicators
Date Total assets Client loans Bond portfolio Other Liabilities and capital Capital Client deposits

South Korea Consumer Electronics

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BMI View: South Korea's devices market is lucrative, but is characterised as low-growth - where an affluent and tech hungry consumer base supports high average selling prices and relatively short replacement rates. However, most growth opportunities are severely depleted due to high penetration rates. The rate of diffusion for new products resulted in a sharp drop off in smartphone, table and flat-panel TV set volumes throughout 2013-2016, and so the market contracted. However, as volumes settle around the replacement rate in the medium term, we forecast a much more stable devices market, with spending expected to...

South Korea Defence & Security

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BMI View: North Korea's pursuit of nuclear weapons and ballistic missiles represents a persistent, increasingly belligerent and direct threat to South Korea. In the face of this, South Korea will continue to invest considerably into strengthening its defence posture - namely its counter strike, reconnaissance and intelligence capabilities - providing opportunities for multinational defence companies. Although the domestic sector lacks the ability to satisfy the more advanced requirements of the South Korean armed forces, its export potential has, and will, continue to...

South Korea Food & Drink

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BMI View: We have a positive outlook on South Korea's food and drink industry over our five-year forecast period to 2019, as a well developed market in South East Asia. Premiumisation in the food and drink industry will lead growth sales as the market is set to reach saturation. The South Korean consumer is moving towards a more westernised culture, adapting new diets and lifestyles. The MGR sector will be dominated by strong local players as we see multinational companies start to pull out of the market.

Headline Industry Data (local currency)

  • Total food consumption growth year-on-year (y-o-y) in 2015: +1.1%; compound annual growth rate (CAGR) 2014-2019: +3.3%.

  • Per capita food consumption growth (y-o-y)...

South Korea Freight Transport

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BMI View: We expect to see moderate growth across the different freight modes in Korea in 2016. Road freight will post the strongest growth across the freight modes, growing by 4.6%, as the uptick in consumer spending will benefit this mode the most. Rail freight growth will increase to 3% in 2016 as the good performance of the domestic construction sector in light of the Winter Olympics in 2018 will drive demand for iron and steel. Air freight will see its growth rate decline to 2% as import demand from China for Korea's consumer electronics will be weak. Over the medium term, we expect the Korean freight sector to benefit from the recently ratified FTA with Vietnam.

Over the short-term we hold a bearish view with regards to the Korean economy as the moderate recovery in the domestic economy will be insufficient to offset the stronger than...

South Korea Information Technology

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BMI View: We have made a further downgrade to the IT market growth forecast for South Korea in the Q415 update. This downgrade reflects weak sales of hardware in H115 reported by retailers and a weakening of economic sentiment following the downturn in regional equity markets in August 2015, which made a recovery in sales during H215 a more remote possibility. Performance in the hardware market will be weakest in 2015, with contraction forecast due to saturation, a weaker consumption outlook and the fact some upgrade demand was brought forward to 2014. However, the outlook for the software and services segments is significantly stronger...

South Korea Infrastructure

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BMI View: Declines in the residential construction market will persist over the next few quarters as the country continues to face economic headwinds from the slowdown in its main trade partners. High levels of household debt will further cap demand for residential property, limiting growth. However, the energy and utilities sub-sector will provide a degree of support, prompting us to maintain our growth forecast for South Korea's construction sector.

Forecast And Industry Developments

  • We expect overall construction industry growth in South Korea to average 1-1.5% over the next decade. With interest rates remaining low and house prices growing at a steady pace, we expect a slight expansion in South Korea's construction sector of 1.4% in real terms for 2016, down from 1.98% over 2015. For...

South Korea Insurance

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BMI View: Both the life and the non-life segments of South Korea's sophisticated insurance sector should benefit from the ageing of the population. In Q416, we have made slight upwards adjustments to our estimates of life and long-term insurance premiums in 2015, but have otherwise left our forecasts unchanged.

Headline Insurance Forecasts (South Korea 2013-2020)
2013 2014 2015e ...

South Korea Medical Devices

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BMI View: South Korea will be one of the slower growing markets within BMI's Asia Pacific region, although it will still outperform other mature markets such as Japan, New Zealand and Australia. Medical device imports will come under further pressure from locally produced products in certain sectors. Although the domestic manufacturing industry remains fragmented, the number of producers has more than doubled in recent years and domestic output will continue to see steady growth as South Korea seeks to further reduce its reliance on imported products, whilst boosting its share of the global market.

Projected Medical Device Market, 2014-2019
Total (USDmn) Per Capita (USD)...

South Korea Mining

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BMI View: Despite the rich deposits of untapped minerals on offer, we believe South East Asia's mining sector will struggle to fulfil its potential over the next few years. China's economic slowdown will remove a crucial outlet for raw material exports in the region and, more importantly, will impact the profitability of mining ventures, with high start up costs likely to deter new investment. While states such as Myanmar have made strides to relax the regulatory environment to encourage increased private sector investment, substantial obstacles remain across many parts of the region, including high levels of corruption and limited infrastructure. As such, many parts of the region continue to be perceived as frontier markets as far as mining activity is concerned.


SE Asia - Mining Sector Industry Values

South Korea Oil & Gas

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BMI View: South Korea will remain a prominent player in the global fuels market, supported by a large and highly sophisticated refining and petrochemicals sectors. Nonetheless, a negligible upstream industry will render the country dependent on crude oil and natural gas imports from international suppliers throughout our forecast period to 2025.

Headline Forecasts (South Korea 2014-2020)
2014 2015e 2016f 2017f 2018f...

South Korea Petrochemicals

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South Korea's petrochemicals output growth will be challenged by dwindling demand from China, as well as the deepening supply glut in the domestic petrochemicals market, which will push down prices and reduce margins. However, the industry's competitiveness coupled with its high value product slate should help producers maintain revenues going forward.

South Korea's integrated petrochemicals supply chain and high value added will enable it to capitalise on growing demand opportunities for petrochemicals in the region's emerging economies. For example, Indonesia's emergence as a regional auto manufacturing hub will increase its demand for synthetic rubber and engineering plastic over the next five years. India's sluggish capacity growth is also widening the gap between demand and domestic supply. These factors should help offset some of the decline in growth of exports to China.


South Korea Pharmaceuticals & Healthcare

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BMI View: South Korea's biomedical research and development sector will continue to flourish in line with growing investments by local drugmakers. Facilitating this commitment is the strong support provided by the government as well as the opportunities to form drug discovery partnerships with leading US-based companies. As the sector develops, the broader economy will benefit and serve to support South Korea's export growth.

Headline Expenditure Projections

  • Pharmaceuticals: KRW16,590bn (USD15.8bn) in 2014 to KRW17,117bn (USD14.6bn) in 2015; +3.2% in local currency terms and -7.1% in US dollar terms. Forecast unchanged from previous quarter, negative growth in USD terms due to currency fluctuations

  • Healthcare: KRW108,...

South Korea Power

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BMI View: The outlook for South Korea's renewables industry remains muted, despite the recent announcement of the government's clean energy investment plan. The country's challenging regulatory environment for renewables and the availability of cheaper sources of power, notably nuclear and coal, will undermine investment in the sector.

Headline Power Forecasts (South Korea 2015-2021)
2015e 2016f 2017f 2018f

South Korea Real Estate

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BMI View: South Korea's highly developed commercial real estate market will continue to benefit from a welcoming business environment and increasing foreign investment. On the demand side, though, a slowdown in China and faltering private consumption could limit appetite for new space across the board. Nonetheless, the outlook for South Korea's commercial real estate in the longer term is bright, as a result of the country's highly developed retail industry and economic diversification strategies.

Real GDP is set to grow slowly but steadily over our forecast period to 2019, increasing by 2.8% in 2015 before rising to 3.4% a year between 2016 and 2019. This should set to scene for continued stability in the...

South Korea Renewables

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BMI View: South Korea will remain dependent on coal and nuclear for its power generation over our 10-year forecast period, despite small gains made with its renewable energy expansion. The prevalence of cheaper fuels will undermine investment into the renewables sector, but we note that the project pipeline for wind power has strengthened over the last six months. We expect 3.3GW of installed wind capacity by 2024.

Renewables Headline Forecasts (South Korea 2014-2020)
2014e 2015f 2016f ...

South Korea Shipping

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BMI View: Our forecasts for South Korea's two main ports anticipate positive growth in 2016, although these figures will post a slight drop on our estimated figures for 2015. Box growth at the Port of Incheon will be the annual outperformer, at 9.7% growth, although over our medium-term forecast period to 2019 the highest port growth will be seen in box throughput at the Port of Busan. With the Chinese economic slowdown mostly abating, and growing real GDP and GDP per capita growth, we see a good macroeconomic foundation on which the shipping industry can reap dividends over the next couple of years.

Growth at South Korea's two major ports, the Port of Busan and the Port of Incheon, will post slightly lower figures in 2016 than those we estimate for the country in 2015. The exception to...

South Korea Telecommunications

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BMI View: We have not made forecast revisions in our latest Q416 South Korea report update. We retain the view that operators are investing heavily in Internet of Things (IoT) strategies and rolling out their own dedicated NB-IoT and LPWA networks. South Korea's mature telecoms market and supportive government policies will create abundant opportunities for operators to drive IoT adoption, although slowing economic growth could weigh on near-term demand.

Growth Driven By 4G Migration
South Korea Mobile Forecasts

South Korea Tourism

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BMI View: Tourism in South Korea will grow over the forecast period. Inbound tourism, driven by increasing numbers of Chinese visitors, will see particularly strong growth. The sector suffered a setback with an outbreak of MERS in 2015 and so South Korea has recently announced a number of plans for cooperation with other Asian countries in an attempt to boost these figures. The Korean government have also recognised the appeal of Korean pop culture across Asia and have recruited a leading soap opera actor as tourism ambassador. The hotel sector remains relatively underdeveloped with only a handful of the major international chains having a presence in the country, however, with the Winter Olympics scheduled in the country in 2018 driving up demand for accommodation, this sector should provide strong opportunities going forward.

Key Forecasts (South Korea 2013-2020)

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