After experiencing an economic slowdown, the highly industrialized country of South Korea has transitioned into a period of economic expansion. In the third quarter of 2025, the nation’s gross domestic product (GDP) contracted by 0.3%, its sharpest contraction since 2020. This downturn was largely the result of U.S.-imposed tariffs and heightened political uncertainty following the impeachment of South Korean President Yoon Seok Yeol.

“On top of the unfavorable base effect, the pace of recovery in construction investment was weaker than expected, dragging down the growth rate a little more,” said Lee Dong-won, director general of the economic statistics department at the Bank of Korea, per Reuters.

In January, consumer inflation dropped to a five-month low, largely in line with market expectations, government data showed on Tuesday, according to Reuters. The consumer price index (CPI) eased to 2.0% from the previous year, compared with gains of 2.3% in the previous month and a median forecast of 2.05%, according to a Reuters poll.

As of late February, inflation is projected to hover near the Bank of Korea’s (BOK) 2% target, averaging roughly 2.2% in 2026 and 2.0% in 2027. This development can be attributed to the prosperity of the chip industry and a stronger-than-expected global economic environment, per an AASTOCKS report.

South Korea’s economic outlook is improving under the new administration of President Lee Jae Myung, particularly as stimulus policies to boost domestic demand have begun to take effect. “Domestic investment is seen improving this year as more government infrastructure projects are expected and companies plan to expand semiconductor factories and artificial intelligence investments,” Lee Dong-won said, per Reuters.

Payment behavior for South Korean customers has improved significantly since last year. In January, customers averaged 10 days beyond terms after having averaged 43 days beyond terms last April, according to FCIB’s Credit and Collections Survey. Consensus on payment delays, however, has remained consistent. The latest survey revealed that 56% of credit professionals doing business in South Korea said payment delays are staying the same, a 1% dip from what was reported previously.

The primary reasons for payment delays from South Korean customers are billing disputes (50%) and customer payment policy (50%), after previously being supply chain and shipping disputes (40%), billing disputes (40%) and cultural norms and customs (40%).

One survey respondent acknowledged that South Korean customers are good payers. Still, respondents exercise caution, advising credit professionals to follow KYC practices when working in South Korea. One respondent advised truly knowing the customer’s business and history using the five Cs of credit: capacity, capital, conditions, collateral and character. “Perform a proper credit evaluation on the customer,” another advised.