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KEI Spotlight

Russia and the US add to South Korea’s economic challenges

January 27, 2023

This article was published on the East Asia Forum on January 27, 2023.

In May 2022, South Korean President Yoon Suk-yeol was elected on a platform calling for a break from his predecessor’s income-led growth strategy to one focused on deregulation and corporate tax cuts. While the new administration has taken steps to implement Yoon’s free market approach, external events have loomed large over South Korea’s trade-dependent economy.

After two years of uncertainty and economic disruptions from the COVID-19 pandemic, coming into 2022 the worry was that the global recovery would lose steam from the spread of the Omicron variant, inflation and continued supply chain disruptions. These challenges were made more difficult due to Russia’s invasion of Ukraine, which accelerated fuel and food inflation.

Russia’s war has most directly impacted the South Korean economy through rising fuel costs. Early on, Seoul took steps to align its policies with the United States and Europe by agreeing to enforce US and European financial sanctions and export controls on strategic items that could aid Moscow’s war effort.

To read the full article on the East Asia Forum, please click here.