The South Korean economy is poised for moderate growth, with GDP forecasted to expand by 2.6% in 2024 and 2.1% in 2025. This growth is primarily driven by robust export performance, particularly in the semiconductor sector, which is anticipated to lead the economic recovery. The favourable external conditions, coupled with an improving trade balance, highlight a resilient export sector that is expected to sustain its momentum.

Headline inflation is projected to decrease to 2.6% in 2024 and further to 2.1% in 2025, aligning closer to target levels. As inflation stabilises, there is potential for a gradual easing of high interest rates, which could further support economic activity, particularly in investment and consumption.

Investment in equipment is expected to pick up, growing by 2.2% in 2024 and accelerating to 3.1% in 2025, largely due to the recovery in the semiconductor market. 

Exports are set to be the cornerstone of South Korea's economic revival, particularly through the semiconductor sector. The global rebound in semiconductor demand and easing trade tensions are favourable for South Korean exports, which also benefit from improved terms of trade. The sustained current account surplus and high net foreign assets underscore the country's strong external economic position.

The South Korean market index KOSPI2 is trading at a PE ratio of 17.81x for the first semester of 2024, much higher than the 11.68x average observed from 2022 to 2023, indicating investor confidence in long-term growth prospects. Despite a recent decline in earnings by 3.9% annually over the past three years, revenue growth of 8.7% per year suggests that companies are generating more sales, albeit at higher costs or investment levels. This optimism reflects a belief in the potential for future earnings recovery as macroeconomic conditions stabilise.

Investing in South Korea offers exposure to a resilient economy with strong export fundamentals, particularly in the semiconductor sector. The anticipated stabilisation of inflation and potential easing of monetary policy provide a supportive backdrop for investment. While challenges such as sluggish domestic demand and demographic changes exist, the overall economic outlook remains positive with significant growth prospects driven by the export sector and improving investment dynamics. The current market valuation reflects investor optimism, making South Korea an attractive investment destination for those seeking growth in the global semiconductor and technology markets.