The Central Bank of South Korea cut its key interest rate by 0.25% to 2.50%. This is the 4th reduction in the cost of money since the start of monetary easing last October.
The deterioration in the economy justifies this policy. In Q1, economic activity contracted by 0.2%, after rising by a modest 0.1% in the previous two quarters and already contracting by 0.2% in the spring of last year.
Over the past twelve months, the South Korean economy has shown no signs of dynamism, with GDP declining by 0.1%.
The latest statistics point to a continuation of this economic slump. Due to international trade turbulence, industrial production, which is heavily dependent on foreign shipments, fell by 0.9% between March and April. Retail sales were already down 1% in March but fell a further 0.9% in April.
Pessimistic outlooks
South Korean households are worried about economic developments. The chaotic political situation, with four interim presidents in six months, is also not reassuring.
This situation indicates weak GDP growth this year, 1% at best, and no apparent improvement in 2026.
Given these poor prospects, we are not investing in South Korea. Don't buy South Korean stocks. You may see different alternatives in our recommended portfolio.
