FDI Inflow Takes a Hit Amid Trade Uncertainties

Foreign Direct Investment (FDI) inflow declarations for the first half of 2025 have witnessed a sharp decline of nearly 15% compared to the previous year. This downturn is largely attributed to the hesitancy of companies to invest, fueled by the ongoing state of emergency and the looming trade uncertainties from the United States.

Breaking Down the Numbers

The Ministry of Trade, Industry and Energy reported a cumulative FDI declaration of $13.1 billion (approximately 17.76 trillion won) for the first half, marking a 14.6% decrease from $15.34 billion in the same period last year. This continues a two-year declining trend, with this year's figures being the lowest since 2022.

Investment Types and Regional Insights

Greenfield investments saw a 4.5% decrease, totaling $10.97 billion, while M&A investments plummeted by 44.6% to $2.13 billion. Regionally, East Asian countries, particularly Japan and China, reported significant drops in FDI. Conversely, the EU and U.S. saw increases, with the EU's FDI rising by 14.5% and the U.S. by 20.2%.

Sectoral Performance

The manufacturing sector experienced a 34.5% decline in FDI declarations, whereas the service sector enjoyed a 10.6% increase. Despite the drop in declarations, the FDI arrival amount rose by 2.7% year-on-year to $7.29 billion, reflecting the execution of previously announced investments.