Business sentiment in South Korea climbed in May to its highest level since 2022, offering one of the clearest signs yet that the country’s economy is regaining momentum after a prolonged period of global manufacturing weakness and supply chain disruption.
According to data released Tuesday by the Bank of Korea, the country’s composite business sentiment index rose sharply to 98.9 in May, marking the strongest monthly improvement in a year and moving corporate confidence close to long term average levels.
The rebound was driven by a combination of factors that have recently begun reshaping South Korea’s economic outlook: recovering exports, easing raw material procurement problems and improving conditions across transportation and consumer related industries.
Manufacturing sentiment rose above the key 100 threshold for the first time since August 2022, reflecting growing optimism among exporters as global demand for technology products and industrial goods improves.
South Korea’s export heavy economy has spent much of the past two years navigating weakening global demand, elevated financing costs and supply disruptions tied to geopolitical tensions and post pandemic logistics instability.
Those pressures now appear to be easing simultaneously.
Companies surveyed by the central bank pointed to stabilizing supply chains and improved financing conditions as major contributors to the recovery in sentiment.
The improvement was especially visible in sectors tied to electronics, machinery and electrical equipment, industries that remain central to South Korea’s manufacturing economy and global export competitiveness.
The recovery also spread beyond factories.
Nonmanufacturing sentiment recorded its strongest increase in three years as transportation, warehousing and wholesale businesses benefited from rising shipping activity and smoother raw material imports.
Industry analysts say that shift reflects a broader normalization of global trade flows after years of volatility caused by pandemic bottlenecks, regional conflicts and fluctuating commodity prices.
Consumer facing industries also showed signs of stabilization.
Retail, leisure and entertainment businesses reported improving conditions as household spending gradually recovered, supported by seasonal holidays and milder weather conditions during the month.
The data suggests South Korea’s economic recovery is becoming more broad based rather than remaining concentrated solely in semiconductors and exports.
Forward looking indicators strengthened as well.
Business expectations for June improved across both manufacturing and service industries, indicating companies increasingly believe current momentum could continue into the second half of the year.
The broader economic sentiment index, which combines business and consumer confidence, recorded its largest monthly increase since early 2021.
For policymakers, the rebound may offer cautious relief after months of concern over slowing domestic demand and uncertainty surrounding global trade conditions.
Still, analysts warn that risks remain.
South Korea’s economy continues to face external vulnerabilities tied to energy prices, geopolitical instability and the pace of global interest rate adjustments. Much of the country’s recovery also remains heavily dependent on export performance, particularly in technology related sectors.
Even so, the latest figures suggest that some of the structural pressures weighing on Asia’s fourth largest economy over the past two years may finally be beginning to ease.
