SEOUL ¨C South Korea¡¯s economic performance appears to be decoupling from that of the United States. While economic growth in 2025 was around 1%, less than half that of the U.S., and far short of the global average of 3.3% ¡ª its stock market soared by 75%, compared to 18% growth for the S&P 500 (and well ahead of 26% and 27% growth for Japan¡¯s Nikkei Index and the Taiwan Stock Exchange, respectively).
The economic slowdown is not surprising. Like Japan before it, South Korea is confronting rapid population aging and the hollowing out of its industry, as investment is increasingly channeled overseas. Rising inequality and growing financialization are exacerbating the problem.
The surprise is that equity prices are skyrocketing despite anemic economic growth, as South Korean President Lee Jae-myung promised they would when he took power last May. At that time, the benchmark Korea Composite Stock Price Index (KOSPI) stood at about 2,600. Against all odds (and critics¡¯ expectations), it reached Lee¡¯s goal of 5,000 within a year.
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