The biggest news story of 2022 was, without question, the Russian invasion of Ukraine in February. The war is the most severe conflict in Europe since 1945 and has raised tensions between nuclear-armed NATO and Russia to the highest level since the Cold War. The next biggest news story was the return of inflation in much of the world. Rising prices have pinched family budgets and caused labor and social unrest. To tame inflation, central banks have raised interest rates rapidly, which has added to economic woes.
These two big stories have affected South Korea less than many other countries. The Russian invasion of Ukraine forced South Korea to side with the West and impose sanctions on Russia that dented trade, but the effects were minimal compared to those for many other countries. Inflation rose in South Korea, but not nearly as much as in many other advanced economies. Interest rates rose, which caused real estate prices to fall, but that was good news to many property-stressed Koreans. The housing slump for overly inflated levels is deflationary.
The two big stories dominated the news, but beyond them were two optimistic stories.
One was the steady return to normalcy as worries about the COVID-19 pandemic receded. The year began as the omicron surge from late 2021 continued. By spring, many restrictions had been lifted and travel was returning to normal.
The other optimistic story was the retreat of anti-democratic populist movements. French President Emmanuel Macron defeated right-wing Marine Le Pen. In Brazil, former President Luiz Inacio Lula da Silva defeated populist President Jair Bolsonaro. And in the US, Republicans performed poorly in midterm elections that they had been predicted to sweep. The weak performance has greatly damaged Donald Trump’s prospects for returning to the White House in 2024.
These optimistic stories were echoed in South Korea. After nearly two years of control, COVID-19 cases in Korea exploded early in the year. A sharp decline in the spring allowed for restrictions to be lifted and by mid-year, except for the indoor mask mandate, most activities had returned to normal. Cases have risen recently as colder weather has set in, but chances are high that it will be lifted in spring 2023.
Compared to France, Brazil, or the US, the South Korean presidential election last March was a tame contest between a center-right and a center-left candidate, neither of whom inspired much passion. Center-right Yoon Suk-yeol won a razor-thin victory over center-left Lee Jae-myung. and began his five-year term in May. Lee Jae-myung graciously conceded defeat, something that Bolsonaro and Trump could not bring themselves to do.
For South Korea, 2022 marks another year of weathering a stormy world well. In the wake of the 1997 Asian financial crisis that nearly caused an economic collapse, the country focused on developing resiliency to avoid being trapped by future global economic crises. This was successful and helped the country weather the Great Recession in the late 2000s and the pandemic economic shocks in 2020. During the same period, civil society matured, as evidenced by the country’s effective response to the pandemic.
The deadly Halloween crush in Itaewon and the recent spate of labor unrest, however, have shaken the nation’s growing self-confidence. Right-left political tension has grown as politicized groups have taken to the streets to press their demands. President Yoon Suk-yeol remains unpopular at a time when people are looking for reassuring leadership.
Behind the worries, however, are deeper worries about the future of the nation amid growing demographic challenges. A rapidly aging population combined with one of the world’s lowest fertility rates saps economic growth and places a heavy financial burden on younger generations. The issue has been in the background for years, but it has reached a point where it can no longer be ignored.
Also, in the background are worries over the future of globalization. South Korea has prospered greatly from booming global trade but growing trade friction backed by protectionist policies is threatening to undermine globalization, which would hurt South Korea harder than most nations. Demographic challenges would only exacerbate the hurt.
Developing long-term strategies for dealing with demographic and trade challenges should be at the top of the policy agenda for 2023. Those strategies can only be effective with a broad national consensus. For that to happen, however, President Yoon needs to offer better leadership to invigorate the political center at the expense of self-serving fringes on the right and left.