Could Excessive Regulations Cost South Korea’s GDP $75.2 Billion in 2025?
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Synopsis
A recent report suggests that excessive regulations could cost South Korea’s GDP a staggering $75.2 billion in 2025. This alarming finding has prompted calls for the government to reconsider its regulatory approach to support business growth and economic stability.
Key Takeaways
- Excessive regulations could cost South Korea's GDP $75.2 billion by 2025.
- The concept of a “growth penalty” highlights the challenges faced by expanding companies.
- Many businesses are limiting growth to avoid regulatory thresholds.
- A significant number of small companies maintain their size to evade regulations.
- Experts call for government reforms to support business growth.
Seoul, Jan 20 (NationPress) Excessive regulations on major corporations might lead to a reduction in the nation’s gross domestic product (GDP) by as much as 111 trillion won ($75.2 billion) in 2025, according to a significant business lobby. They have urged the government to alleviate the regulatory pressures on businesses aiming for growth.
The Korea Chamber of Commerce and Industry (KCCI) provided this analysis in a report, highlighting the concept of a “growth penalty,” which describes the additional tax and regulatory challenges faced by companies as they expand, ultimately hindering the overall advancement of Asia's fourth-largest economy, as reported by Yonhap news agency.
According to the KCCI, South Korean firms are intentionally limiting their growth due to regulations, often restricting their workforce to 50 or 300 employees, or opting for corporate spin-offs to sidestep regulatory thresholds.
The KCCI's findings indicate that such distortions in the business environment are expected to decrease the country's annual GDP by 4.8 percent in 2025.
For instance, nearly 60 percent of small businesses with fewer than 50 employees have maintained their size for over five years, a significant rise from around 40 percent in the 1990s, as noted in the report.
This trend signifies that companies are increasingly inclined to keep the status quo to evade regulations, according to the KCCI.
The probability of a small business evolving into a mid-sized entity is currently pegged at just 2 percent, while the chance of it maturing into a large conglomerate is a mere 0.05 percent.
“The government must proactively reform regulatory and taxation frameworks and introduce incentives that motivate businesses to enhance productivity voluntarily,” remarked Park Jung-soo, an economics professor at Sogang University.
Moreover, around 40 percent of South Korean manufacturers anticipate a downturn in economic conditions this year, amidst heightened volatility in the foreign exchange (FX) market, according to a recent poll.
Point of View
It is crucial for the government to address the burden of excessive regulations that hinder business growth. A balanced approach is necessary to ensure that economic growth does not come at the cost of innovation and job creation.
NationPress
20/01/2026
Frequently Asked Questions
How much could regulations cost South Korea's GDP?
Regulations may cost South Korea's GDP up to $75.2 billion by 2025.
What is the 'growth penalty'?
The 'growth penalty' refers to extra tax and regulatory burdens imposed on companies as they expand.
What are the chances of small businesses growing?
Currently, the likelihood of a small business becoming mid-sized is 2%, and just 0.05% for becoming a large conglomerate.
What do manufacturers expect for the economy this year?
About 40% of manufacturers expect economic conditions to worsen due to increased volatility in the foreign exchange market.
What recommendations have experts made?
Experts suggest the government should reform regulatory and taxation policies to encourage business productivity.
