[Column] The Okay-shaped cloud hanging over Korea’s financial system

President Lee Jae Myung of South Korea speaks at a New Yr’s press convention on the Blue Home state guesthouse on Jan. 21, 2026. (Yonhap)

By Ahn Seon-hee, editorial author

South Korea’s benchmark KOSPI index surpassed 5,000 for the primary time in historical past on Jan. 22. In comparison with the financial state of affairs only a 12 months in the past, when an surprising try at a self-coup had the whole lot feeling prefer it was on the point of collapse, it seems like a distinct world. 

Client confidence was frozen, monetary markets have been unstable, and export prospects have been additionally foggy. Fortuitously, issues stabilized as the brand new administration took workplace; the KOSPI, particularly, has risen at a dizzying tempo. 

The nation’s financial progress charge was a mere 1% final 12 months; this 12 months it’s anticipated to be round 2%. These aren’t essentially the most favorable of figures, however potential progress charges are recovering. The foremost disaster is behind us, and we will breathe a short sigh of aid. However we now discover ourselves confronting a brand new problem: the so-called Okay-shaped restoration mannequin. 

“We are actually going through the grave problem of ‘Okay-shaped’ progress,’” President Lee Jae Myung mentioned on Jan. 9. Throughout his New Yr’s press convention on Jan. 21, Lee vowed to “overcome the problem of Okay-shaped progress.” 

Addressing this rising polarization of the financial system is prone to be the federal government’s main concern this 12 months. Financial institution of Korea Governor Rhee Chang-yong mentioned that the nation’s financial system is prone to make a Okay-shaped restoration this 12 months, expressing his issues about “the issue of reaching sustainable and full restoration.”  

Language relating to a Okay-shaped restoration began showing in earnest through the COVID-19 pandemic. The shock produced by the pandemic drove down financial progress to -0.7%, which rebounded to 4.6% in 2021, drawing what many seen as a “V-shaped” restoration. 

Nonetheless, upon nearer inspection, the form is definitely nearer to a “Okay,” with one arm angling upwards and different downwards — a sort of restoration that reveals a widening disparity.

Whereas companies tied to the digital realm — on-line platforms, e-commerce and semiconductors — have profited immensely, enterprise homeowners tied to retail and the meals and beverage trade are shutting down or scraping by by debt. The divide between monetary markets and the actual financial system has widened. Regardless of unfavorable progress, the KOSPI has hit an all-time excessive, and real-estate costs are hovering to such heights that they’re shaking the general public’s religion within the administration. 

The principle chief of the upward-reaching arm of our Okay-shaped financial system is clearly chipmakers. Beginning within the latter half of final 12 months, the unreal intelligence growth has ushered in a brilliant cycle for semiconductors. The financial system’s dependence on chipmakers is nothing new, and has produced rumblings a couple of “chip phantasm” or bubble. But the proportion of exports that chips comprise rose to 24.4% final 12 months — a document excessive — and has continued to rise 29.5% thus far this 12 months (Jan. 1-20).  

When excluding chips, South Korea’s internet exports final 12 months really diminished in comparison with the earlier 12 months — notably in petrochemicals, rechargeable batteries, show know-how, metal, and digital home equipment. In different phrases, the majority of Korea’s trade. Home companies merely can’t compete with Chinese language counterparts who provide the identical merchandise for cheaper. As of Jan. 22, Samsung Electronics and SK Hynix account for 35.4% of the KOSPI’s complete market cap.  

Korea is seeing a repeat of the juxtaposition of a cold actual financial system and a steaming monetary market. Final 12 months, Seoul actual property costs reached the very best stage since 2006, and we are actually within the KOSPI 5,000 period. Whereas one can’t definitively measure surging share costs based on the correlated rise of property values, each asset classes symbolize an more and more increasing wealth disparity.  

This Okay-shaped mannequin of progress and restoration is, in different phrases, an exemplification of polarization, which is calcifying right into a systemic drawback within the Korean financial system. 

This perpetuating imbalance that favors sure industries will inevitably outcome within the growth of inequality among the many lessons. There’s a divide that separates exporters, main firms, common staff not beholden to short-term contracts, the Seoul metro space, and asset holders from home consumption, SMEs and small enterprise homeowners, contracted staff, the financial system outdoors of the Seoul metro, and folks with out property. That divide is rising wider. 

In his New Yr’s tackle, the president mentioned he would shift Korea’s progress technique from one centered on massive firms to “progress that advantages all, wherein alternatives and the fruits of progress are shared equitably.” He echoed that pledge throughout his New Yr’s press convention when he vowed to transition to “progress shared by everybody.”

The “2026 Financial Development Technique” introduced by the Lee administration on Jan. 9 additionally included “selling balanced progress for all and addressing polarization” amongst its key aims. 

Nonetheless, the vast majority of these pledges have been minimal or easy repetitions of earlier insurance policies, with little of be aware up to now. Lee recognized the “large activity” of fostering the nation’s startups and enterprise companies. True, such elements are important in an revolutionary financial system, however it’s questionable whether or not they can result in progress for everybody on their very own.  

There shall be no in a single day options for issues which have amassed for a very long time. But maybe the reply is true beneath our noses. Industrial insurance policies adjusted based on technological modifications, the coexistence of conglomerates and SMEs, the decision of discrimination between common staff and contracted ones, stabilization of the property market, and elevated redistribution by honest taxes and expanded welfare —these are the options already obtainable. 

What the Lee administration wants is the capability to craft and fine-tune insurance policies to such an finish. He additionally wants a robust will to stroll the stroll and to exhibit management that may get the general public on board. 

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