South Korea’s Multifront Economic Reckoning: Land, Labor, and Currency Under Stress

Executive Summary

South Korea’s economy faces converging pressures that demand urgent structural recalibration. From agricultural reform debates and nuclear export ambitions to a weakening won and a disengaged workforce, these developments reveal a nation grappling with the limits of its traditional growth model. Each challenge—whether demographic, monetary, or industrial—reflects deeper systemic vulnerabilities that threaten long-term competitiveness. How policymakers address these interconnected issues will shape South Korea’s ability to navigate global volatility and domestic stagnation.

Agricultural Modernization Meets Institutional Reform

The proposed Amendment to the Farmland Act, allowing the National Agricultural Cooperative Federation (Nonghyup) to own farmland, signals a shift toward centralized land management. By enabling Nonghyup to acquire land for projects like solar power generation and joint farming, the government aims to address rural depopulation and inefficient land use. With 610 cooperatives already supporting 125,000 farms and managing 1.84 million hectares, this reform could streamline policy implementation. However, risks of speculative land grabs and bureaucratic overreach loom. The requirement to sell unused land within a year attempts to mitigate misuse, but success hinges on balancing public oversight with private-sector dynamism.

Nuclear Exports: A Geopolitical and Industrial Gambit

South Korea’s reactivated Pan-Government Export Strategy Committee underscores its ambition to dominate the global nuclear energy market. Targeting Vietnam’s $22 billion Ninh Thuan 2 project—and eyeing opportunities in Turkey, Saudi Arabia, and the UAE—reflects a strategic pivot. With Japan withdrawing from Vietnam’s nuclear race, Korea’s state-backed financing model, including a new $32 trillion Strategic Export Finance Fund, provides competitive leverage. Yet geopolitical tensions complicate this push: U.S. pressure on Saudi Arabia to adopt American reactor designs highlights the tightrope Seoul must walk between technological autonomy and alliance politics. Success here could revitalize Korea’s high-value exports but requires navigating an increasingly fragmented global energy landscape.

Dollarization and the Erosion of Monetary Sovereignty

The won’s sustained weakness has triggered a quiet crisis of confidence. Individual dollar holdings surged to $171.8 billion in early 2026, up 53% from 2024, while direct U.S. financial account investments jumped 35% to 11.8 trillion won. This capital flight, driven by perceptions of the won as a “depreciating constant,” undermines domestic investment. The government’s response—tax incentives for repatriating overseas gains—appears reactive. A 100% income deduction for converting foreign stock profits into won-based investments temporarily props up local markets but fails to address structural drivers: restrictive regulations and lagging foreign direct investment. Without restoring faith in the won’s stability, Korea risks a vicious cycle of devaluation and asset flight.

Youth Disengagement: A Structural Time Bomb

The rise of the ‘resting’ youth—450,000 in 2025, up 57% since 2019—exposes labor market fractures. Contrary to stereotypes of entitlement, these individuals seek modest wages (31 million won annually) and prefer SMEs (48% of respondents). The Bank of Korea attributes their exit to “AI-driven displacement” and employers’ bias toward experienced workers. Prolonged unemployment reduces re-entry likelihood by 4% annually, disproportionately affecting those with sub-bachelor’s degrees (59.3% of the ‘rested’ cohort). Proposed solutions—career counseling and SME incentives—are palliative. Deeper issues, like housing costs consuming education budgets, demand systemic fixes. Without intervention, Korea’s aging workforce faces a productivity collapse.

Inflation’s Dual Engine: Semiconductors and Food

December’s 0.4% producer price rise, the fourth consecutive increase, reveals bifurcated pressures. Semiconductor prices jumped 15.1% (DRAM) amid AI-driven demand, while agricultural costs spiked (apples +19.8%, tangerines +12.9%). This divergence complicates monetary policy: the BOK must balance supporting tech exports—a lifeline amid weak domestic demand—against food inflation eroding household budgets. With services inflation (finance +0.7%, restaurants +0.4%) creeping upward, stagflation risks intensify.

Conclusion: Navigating the Polycrisis

South Korea’s economic challenges are neither isolated nor temporary. Agricultural reforms must modernize without stifling innovation; nuclear exports require deft geopolitical maneuvering; dollarization demands confidence-building fiscal discipline; youth disengagement needs education-to-employment pipeline overhauls; and inflation management calls for sector-specific tools. The Yoon administration’s piecemeal responses—tax tweaks, export committees—lack the coherence needed for a polycrisis. Prioritizing structural over symptomatic fixes, particularly in labor markets and currency stability, will determine whether Korea transitions into a high-value, resilient economy or succumbs to middle-income stagnation. The clock is ticking.