South Korea's $350 billion investment plan in strategic U.S. sectors, a key component of a recent trade deal, is facing delays. Finance Minister Koo Yun-cheol reveals that the investment is unlikely to commence in the first half of 2026, contrary to initial expectations. This delay is attributed to the weakening Korean Won, which has slumped to levels not seen since the 2008 financial crisis, despite strong export performance and a booming stock market. The government is now focusing on stabilizing the currency and managing outflows to prevent further depreciation.
The trade deal, signed in November, includes a cap of $20 billion on annual dollar investment outflows. This cap is intended to manage the impact of the weakened Won on the South Korean economy. Minister Koo emphasizes that the process of selecting and implementing projects, such as nuclear power plants, will be gradual, ensuring that the initial outflows remain within the agreed limit.
The South Korean government is also considering measures to curb dollar demand among domestic investors, as suggested by Deputy Finance Minister Choi Ji-young. These efforts aim to stabilize the currency and prevent herd behavior in the markets, which could exacerbate the depreciation of the Won. The government's strategy includes encouraging the National Pension Service to sell dollars and promoting exporters to convert more of their earnings into Won.
Despite these measures, the Won continues to face significant depreciation pressure. The government is committed to implementing the investment package as soon as possible, but uncertainty surrounding a U.S. court ruling on Trump's tariffs could impact the timeline. The focus remains on stabilizing the currency and managing the investment outflows to ensure a successful and timely execution of the plan.
