South Korea's economic policy uncertainty index rises to highest in five years due to sudden political and economic changes

According to a report by the Korea Chamber of Commerce and Industry's Sustainable Growth Initiative (SGI), the economic policy uncertainty index for December 2024 was 365.14.
This is 3.4 times higher than in December 2014, when the index was 107.76. The election of Donald Trump as president of the United States and the declaration of martial law in South Korea have led to political changes both at home and abroad.
The economy took a sudden turn, which led to the index increasing. The Japan-Korea trade dispute pushed the index to 538.2, the highest since August 2019.
It was found that if the economic policy uncertainty index increases by 10 points, domestic capital investment will decrease by 8.7% in about six months.
This indicates that capital investment in the first half of 2025 will continue to decline until the uncertainties are resolved. In fact, according to Statistics Korea, capital investment in January fell 14.2% from the previous month.
However, semiconductors and automobiles have been greatly affected by sustained global demand and intensifying technological competition, and investment continues, albeit moderately.
In response to this situation, SGI is working to improve the accuracy of economic policy forecasts and to provide sufficient time to respond to policy changes.
The analysis states that the government needs to make efforts to strengthen communication with companies, focusing on the issue of how to deal with these problems. Companies can diversify their investment risks by expanding overseas through mergers and acquisitions (M&A) with promising companies.
He claimed.