A stark contrast to the past, the streets of Myeong-dong in central Seoul now exude an empty atmosphere, with noticeably fewer pedestrians passing by. (Yonhap)
SEOUL, March 7 (Korea Bizwire) — Amid a prolonged economic downturn, a vast majority of South Korean businesses anticipate a financial crisis in 2025, according to a new survey by the Korea Employers Federation (KEF).
The survey, conducted in January among 508 domestic companies with at least 50 employees, revealed that 96.9% of respondents expect an economic crisis this year. Of those, 22.8% believe the crisis will be more severe than the 1997 IMF financial crisis, while 74.1% foresee significant turmoil, though not on the same scale as the IMF crisis.
Concerns Over Political Instability and Trade Policies
Businesses cited currency volatility impacting export competitiveness (47.2%), weakened consumer sentiment and declining domestic demand (37.8%), and investment uncertainty (26%) as the most significant economic risks stemming from domestic political instability.
Regarding regulatory challenges, 38.4% of companies identified increased labor costs due to expanded ordinary wage classifications as the most pressing issue. This follows a Supreme Court ruling in December 2024, which mandated that certain conditional bonuses be included in the scope of ordinary wages, raising concerns over rising labor costs and potential labor disputes.
Other major regulatory concerns include stricter workplace safety laws (28.3%) under the Serious Accidents Punishment Act and work-hour restrictions (22.8%) tied to the 52-hour workweek policy.
According to the “December 2024 and Annual Industrial Activity Trends” report released by Statistics Korea on February 3, retail sales, which reflect goods consumption, declined by 2.2%. This marks the largest drop in 21 years, since the 3.2% decline in 2003 during the credit card crisis. The photo shows a noticeably quieter-than-usual Myeongdong shopping district in Seoul. (Yonhap)
Business Sentiment on Regulatory Environment
When asked about the overall regulatory environment for businesses in 2025, 34.5% predicted a deterioration compared to last year, while 57.4% expect no change. Only 8.1% foresee improvements.
Companies that anticipate worsening regulations cited increased global trade restrictions, including potential tariffs from the Trump administration’s second term (45.7%), tighter corporate regulations from the National Assembly (29.1%), and a perceived weakening of the government’s commitment to regulatory reform (26.9%).
Call for Regulatory Reforms
In response to these concerns, 37.2% of respondents called for stronger regulatory reduction measures as the top policy priority for the government in 2025.
Kim Jae-hyun, head of KEF’s regulatory reform team, emphasized the urgent need for policy action, stating, “With global trade restrictions tightening and domestic political uncertainty rising, businesses face an unpredictable environment. Regulatory reform is the most effective policy tool to revitalize economic activity without increasing government spending.”
M. H. Lee (mhlee@koreabizwire.com)
