South Korea’s economy is deteriorating, squeezed by political instability and a weakening currency. 

The won has lost over 12% of its value against the dollar in 2024, making it Asia’s worst-performing currency.

This sharp decline has driven up import costs, fueled inflation, and left policymakers balancing the need for economic stimulus with concerns about financial stability.

The South Korean political crisis: what happened?

In December 2024, President Yoon Suk-yeol attempted to impose martial law—a move that quickly backfired.

The controversial action led to his impeachment and subsequent arrest. This was the second presidential impeachment in South Korea since 2016 and the first-ever arrest of a sitting president. 

The fallout has triggered the country’s largest political crisis in decades, disrupting governance and delaying critical economic decisions.

The crisis has left South Korea without clear leadership at a time when the global economy is fraught with uncertainty.

Acting President Choi Sang-mok, who is also the finance minister, is attempting to stabilize the situation, but the government’s reduced capacity to implement policies has become a major concern.

What’s happening with the South Korean won?

The South Korean won fell to its lowest level in 15 years in December 2024, trading at 1,487 won per US dollar.

This represents a dramatic 5.3% drop in December alone, the second largest monthly drop in history, only behind the Russian ruble’s decline in February 2022. 

According to the Bank of Korea (BOK), political instability weakened the currency by approximately 30 won against the dollar.

The arrest of Yoon temporarily stabilized the exchange rate, but sustained recovery will depend on how quickly political stability is restored.

A weak won has serious consequences for South Korea’s trade-reliant economy.

Import prices for essentials like gasoline and sugar have surged by up to 97%, adding inflationary pressure.

December’s consumer price index rose 1.9% year-on-year, up from 1.5% in November.

The BOK estimates that the currency depreciation alone contributed 0.05 to 0.1 percentage points to this increase.

Risks of ‘stagflation’?

South Korea’s recent stagnation in growth and rise in inflation have started raising some questions about whether the nation’s economy could face a rare scenario of “stagflation”. 

The government recently revised its 2025 GDP growth forecast down from 2.2% to 1.8%, reflecting the worsening outlook.

Domestic demand is weakening, and export growth is slowing, indicating a shift to a prolonged low-growth trajectory. 

Analysts warn that prolonged political instability could further dampen growth while inflationary pressures from the weakened won add another layer of strain.

External factors exacerbate the risk.

The return of Donald Trump to the US presidency raises concerns over potential protectionist trade policies, including tariffs on exports from major economies like South Korea.

Such measures could disrupt global supply chains and further suppress export demand, deepening South Korea’s economic stagnation. 

Interest rates: to cut or not to cut?

The Bank of Korea has been hesitant to reduce its key interest rate, holding its policy rate at 3% in its most recent meeting in January 2025.

This was seen as a surprise move after two consecutive reductions in October and November.

Governor Rhee Chang-yong explained that the decision was influenced by the need to stabilize the won, which remains under significant pressure.

Further rate cuts could weaken the currency further, exacerbating inflation and financial instability.

However, the BOK has expressed its openness to additional rate cuts in the near term, with economists predicting that the policy rate could fall to 2.25% by the end of 2025.

Rhee emphasized that resolving political instability is a more critical priority than immediate monetary easing.

“A normalization of the political process is way more important than lowering interest rates a month earlier or later,” he said.

Some economists remained worried that holding rates too high could stifle economic recovery in the long run. 

External pressures and future risks on South Korean economy

South Korea’s economic challenges are not confined to domestic issues.

It also faces risks from other nations, with potential US trade policies under Donald Trump likely to create headwinds.

Tariffs on Chinese goods could disrupt supply chains and dampen demand for South Korean exports.

Conversely, such policies could offer opportunities if they improve the competitiveness of South Korean goods in the US market.

The BOK and economists also point to structural growth risks. South Korea’s potential GDP growth is expected to average 2% from 2023 to 2026, declining to 1.9% by 2030.

This signals a shift to a low-growth trajectory unless significant reforms are implemented.

Acting President Choi has announced several initiatives to support the economy, including front-loading fiscal spending and expanding aid programs for small businesses.

The BOK has increased its support for smaller companies, raising the budget for these programs from 9 trillion won to 14 trillion won.

What lies ahead for South Korea?

South Korea’s economic recovery hinges on political stability.

Without it, investor confidence will remain shaky, and the currency could face further depreciation.

The longer the crisis drags on, the greater the risk of long-term damage to the country’s economic foundations.

While the government and the central bank are taking steps to mitigate immediate risks, broader structural reforms are needed to address underlying vulnerabilities.

These include reducing dependence on exports, diversifying the economy, and strengthening social safety nets to ensure resilience in the face of future crises.

The road to recovery will not be easy, but resolving political turmoil is the first step toward restoring confidence and rebuilding momentum for Asia’s fourth-largest economy.

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As the US navigates its trade relationship with China, one of the most significant players shaping this dynamic is Elon Musk.

With deep business ties to China through Tesla and other ventures, Musk’s influence on the US trade policy could have far-reaching consequences—not just for the US and China but also for India’s economic trajectory.

Musk’s role in US-China relations

Elon Musk’s business empire is intricately connected to China.

Tesla, his electric vehicle giant, relies heavily on Chinese manufacturing and consumer demand, while Musk’s social media platform X is also under scrutiny from the Chinese government.

His deep involvement in both American and Chinese markets makes him an influential figure in shaping future US-China trade relations.

While many business leaders have stakes in China, Musk’s unique position—being both a close advisor to US leadership and a major corporate figure with Chinese interests—may allow him to exert disproportionate influence on US policy toward China.

It’s reported that Musk could even play a role in easing tensions between the two superpowers, potentially through business deals like acquiring TikTok’s US operations to prevent the app’s ban.

India’s fragile position amid trade shifts

India, which has long navigated complex trade relationships with both the US and China, could find itself in an awkward position if Musk’s influence continues to grow.

Musk has been outspoken about India’s high import tariffs, particularly on electric vehicles, which could fuel trade tensions between India and the US.

To attract Musk and other industry leaders, the Indian government recently lowered import duties on electric vehicles from 100% to 15% in 2024, hoping to encourage investment and reduce the economic burden on domestic consumers.

Despite these efforts, Musk’s proximity to US policymakers could reignite trade disputes, especially if US trade policies align more closely with Musk’s views on lowering tariffs on electric vehicles—potentially at the expense of India’s economic interests.

Tariff proposals and their impact

As US President-elect Donald Trump promises aggressive tariff strategies in his second term, the implications for India could be complex.

While tariffs on Chinese goods are expected to benefit countries like India as American companies diversify their supply chains, the broader economic consequences of these measures could still harm India.

The US could impose tariffs on a range of imports, with industries such as steel, pharmaceuticals, and manufacturing likely to see benefits from reduced competition.

However, rising tariffs might lead to inflation, which could squeeze consumer spending and slow down global trade.

Musk’s role here becomes critical.

If US tariffs, influenced by Musk’s lobbying, focus on high-tech sectors like electric vehicles or batteries, India’s emerging electric vehicle market might face additional challenges.

The Indian government’s effort to promote its auto sector could be undermined if the US trade policies align more with Musk’s preferences, putting India’s economic growth at risk.

The ripple effect of US-China tensions

Musk’s influence on US-China trade could also contribute to larger shifts in global trade dynamics.

If tariffs between the US and China escalate or remain in place for an extended period, it could lead to a reordering of supply chains that could leave India at a disadvantage.

American companies may increasingly shift their manufacturing away from China, but the ability of countries like India to absorb this shift remains uncertain.

Further complicating the matter is the COVID-19 pandemic, which accelerated the global trend of businesses seeking alternatives to China-based supply chains.

This factor, combined with Musk’s interest in smoothing over US-China relations, could lead to a reduced focus on India as a viable manufacturing hub.

Will Musk’s influence continue to grow?

While Musk’s role in US-China trade policy is becoming more evident, it’s not without its complications.

Despite Musk’s close relationship with Trump, there have been instances where Musk’s preferred candidates and policies have not been fully embraced by the administration.

For example, Musk backed Howard Lutnick for Treasury Secretary, but Trump ultimately chose Scott Bessent, a figure less aligned with Musk’s views.

This unpredictability in Musk’s influence over US trade policy means that while India faces potential challenges, the situation remains fluid.

The ongoing developments in US-China relations, coupled with Musk’s direct involvement, will likely continue to shape global trade dynamics in unpredictable ways—especially for countries like India, which are navigating their trade policies with the US and China.

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As tax season approaches, millions of Americans are gearing up to prepare their 2024 tax returns. However, for those involved in cryptocurrency transactions, a significant shift is on the horizon.

Starting in 2025, new third-party reporting requirements will compel centralized crypto platforms like Coinbase and Gemini to report users’ transactions directly to the IRS (Internal Revenue Services).

This landmark move is designed to improve tax compliance and transparency in the burgeoning digital asset market.

Centralized platforms under the microscope

The IRS has announced that beginning with the 2025 tax year, custodial platforms dealing in cryptocurrencies will be required to provide transaction data on a new tax form, the 1099-DA.

This form, which will be sent to both taxpayers and the IRS in early 2026, will include detailed records of purchases and sales conducted on these platforms.

According to the IRS, brokers obligated to comply include custodial trading platforms, hosted wallet providers, and certain payment processors handling digital assets.

While brokers are not required to report cost basis — the original purchase price of a digital asset used to calculate taxable gains — until 2026, they will document gross proceeds from transactions starting in 2025.

The IRS has emphasized that the new rules are not introducing additional taxes but are aimed at ensuring taxpayers meet their existing obligations.

Failure to include 1099-DA information on 2025 tax returns could trigger discrepancies, as the IRS will already have the data on file.

Decentralized exchanges: a delayed timeline

For crypto investors who prefer decentralized platforms like Uniswap or Sushiswap, the timeline for compliance is less immediate.

These platforms, which facilitate wallet-to-wallet transactions without holding custody of assets, will not be subject to third-party reporting requirements until 2027.

When these rules take effect, decentralized platforms will only report gross proceeds from transactions.

Unlike centralized exchanges, they will not provide cost-basis information since they do not manage or store users’ digital assets.

In a CNN report, Jessalyn Dean, Vice President of Tax Information at Ledgible, a crypto tax software company, underscores the importance of personal record-keeping for users of decentralized platforms.

Without comprehensive reporting from these exchanges, taxpayers will bear greater responsibility for accurately calculating their taxable gains and losses.

Bitcoin ETFs and taxable events

The rise of spot bitcoin exchange-traded funds (ETFs) has added another layer of complexity to crypto tax reporting.

Investors in these funds should be aware that they too will receive 1099-B or 1099-DA forms from ETF providers.

Unlike traditional stocks, bitcoin ETFs may generate taxable events even without direct sales by investors.

This is because ETF managers often sell portions of their holdings to cover expenses, creating gains or losses that are passed on to shareholders.

“there’s a gain or loss on the sale inside the fund and investors will have to calculate their applicable portion of that,” Dean explained.

Dean advises bitcoin ETF investors to consult tax professionals to ensure compliance with these nuanced rules.

The introduction of the 1099-DA form is part of a broader effort by the IRS and the US Treasury to simplify tax compliance in the digital asset space.

Ledgible CEO Kell Canty explains that these reporting requirements are not a new tax but a mechanism to reduce inadvertent errors and improve transparency.

The US Treasury has echoed this sentiment, stating that the changes aim to remind taxpayers of their obligations and streamline the filing process.

By ensuring that more transactions are reported, the government hopes to close gaps in compliance and reduce the administrative burden on taxpayers.

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India’s economic growth is set to maintain a steady pace of 6.7% annually for the next two fiscal years, as per the World Bank’s latest projections.

This forecast positions India as a resilient force in South Asia’s recovery, bolstered by robust private consumption and government-led initiatives.

With global economic uncertainty casting a shadow, India’s balanced mix of domestic demand, manufacturing revival, and sustained service sector growth stands out as a key factor in maintaining its trajectory.

This consistency underlines India’s growing role as a stabilising economic force in a volatile global landscape.

The services sector fuels India’s growth

The World Bank’s analysis emphasises that the services sector will continue to drive India’s growth, benefiting from structural reforms and expanding digitalisation.

The manufacturing sector, although facing challenges in the short term, is projected to gain momentum as government policies aimed at ease of doing business and infrastructure upgrades take effect.

These initiatives are expected to attract steady private investment, offsetting a predicted moderation in public spending.

India’s rural economy is also contributing significantly to private consumption.

Improved rural incomes, alongside higher agricultural output, have reinforced demand.

This dynamic creates a positive feedback loop, where rural prosperity supports consumer spending, which in turn aids broader economic recovery.

Private investment to anchor medium-term expansion

A notable aspect of India’s growth narrative is the anticipated shift in the investment landscape. The World Bank highlights a gradual transition from public to private sector-led investments.

Infrastructure projects and digital transformation are seen as catalysts for attracting foreign direct investment, particularly in green energy and technology sectors.

This shift is expected to mitigate risks associated with global economic headwinds.

While manufacturing experienced some softness, improvements in supply chain resilience and trade logistics are expected to strengthen industrial activity.

The government’s emphasis on reducing bureaucratic hurdles further enhances investor confidence.

India as a stabilising force

In comparison to its South Asian neighbours, India’s growth trajectory remains a standout.

While Pakistan and Sri Lanka have shown signs of recovery after adopting stringent macroeconomic reforms, their growth rates remain subdued.

In Bangladesh, political instability and supply-side challenges have hindered industrial progress, with growth expected to dip to 4.1% in FY2024/25.

Excluding India, South Asia’s growth is forecast at 3.9% in 2024, rising marginally to 4.3% by 2026.

This disparity underscores India’s role as a stabilising force in the region, contributing significantly to South Asia’s collective economic output.

The World Bank’s projection of 6.7% growth for India reflects the country’s ability to navigate global uncertainties while leveraging domestic opportunities.

With policy support for key sectors, rising private investments, and a focus on digital and green infrastructure, India is poised to sustain its position as an economic leader in the region.

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China’s population dynamics remain a critical challenge for its economic and social stability.

Despite a modest rise in births in 2024, the nation’s population shrank for the third consecutive year, highlighting systemic issues that years of government interventions have yet to resolve.

The total population fell by over 1.39 million to 1.408 billion, even though 9.54 million babies were born this year—520,000 more than the previous year. This paradox points to deeper demographic shifts beyond immediate birth rate fluctuations.

China’s population problem

The decline in China’s population reflects a shrinking workforce and an ageing demographic, both of which pose long-term economic risks.

Over decades, the workforce has consistently contracted, reducing productivity and innovation potential.

Meanwhile, the proportion of elderly citizens continues to rise, putting enormous pressure on China’s pension and healthcare systems.

Policies introduced in recent years to counter these trends have had limited impact.

Furthermore, government initiatives to encourage larger families—such as expanded access to childcare, housing support, and healthcare—have yet to yield significant results.

The rising costs of childcare and education, coupled with job uncertainty and a slowing economy, have deterred many young Chinese from marrying and starting families.

A 12.4% increase in marriages in 2023, largely delayed by the COVID-19 pandemic, contributed to a rebound in births in 2024, according to demographers.

However, the birth rate is expected to decline again in 2025.

In China, marriages are a key indicator of birth rates, as many single women are ineligible for child-raising benefits.

China’s one-child policy

China’s current demographic challenges are rooted in its restrictive family planning policies of the past.

The one-child policy, enforced for decades, created a deeply ingrained cultural norm favouring smaller families.

When the policy was relaxed in 2016 to allow two children per family, and later expanded further, the anticipated baby boom failed to materialise.

Data reveals that the number of births in 2024, although slightly higher than in 2023, was still the second lowest since the establishment of the People’s Republic of China in 1949.

Bloomberg Intelligence projects that China’s population could fall to 1.36 billion by 2035—levels last seen over a decade ago—unless substantial structural changes occur.

What does this mean for China’s economy?

The economic repercussions of a declining population are vast. Fewer working-age individuals mean slower economic growth and a diminished capacity to support a growing elderly population.

China’s pension system, already underfunded, is expected to face severe strain, while plans to raise the retirement age—announced in 2023—have been met with widespread public resistance.

Experts argue that addressing this demographic crisis requires more than piecemeal policy adjustments.

Comprehensive reforms are necessary to make childcare and education more affordable, ensure equitable access to healthcare, and reshape societal perceptions about family life.

Without such measures, China’s economic resilience may be at risk, potentially affecting its global standing.

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