Korea invests more abroad, attracts less foreign investments

A Hana Bank employee sorts U.S. dollars at the bank's counterfeiting prevention center in Seoul, April 21. Yonhap

Foreign direct investment in Korea fell four notches in 2024 from a year earlier, ranking 17th among the world’s top 30 economies, data from the Bank of Korea (BOK) showed Sunday.

The drop appeared to have been driven by foreign investors scaling back or postponing investments in response to a sharp decline in economic confidence following the Dec. 3 martial law declaration by ousted President Yoon Suk Yeol.

This triggered political turmoil and rattled the foreign exchange and stock markets, according to the central bank.

In contrast, overseas investment by Korean individuals and corporations climbed three spots, ranking 10th.

The growing imbalance between capital inflow and outflow is viewed as a potential drag on the domestic economy, raising concerns that this could undermine Korea's long-term industrial competitiveness and weaken overall economic momentum.

BOK data showed that overseas investment into Korea amounted to $37.18 billion in 2024, representing a steep 33.8 percent drop from the previous year.

Based on country-level data from the International Monetary Fund (IMF), Korea ranked 14th among the top 30 global economies in foreign funding inflow in 2022, then improved to 13th in 2023, but slipped to 17th in 2024.

Specifically, in the fourth quarter of last year, amid the ill-fated declaration of martial law, foreign investment in Korea declined by $1.18 billion, marking the first quarterly decrease since the early stage of the COVID-19 pandemic in the first quarter of 2020, when the figure fell by $459 million.

In the fourth quarter, the country’s ranking for foreign investment inflows dropped sharply by nine places to 23rd, down from 14th in the same period the previous year.

This quarterly performance was worse than that of Argentina, which is receiving IMF bailout support, and Russia, which is affected by the ongoing war in Ukraine.

Meanwhile, the United States, France and Germany continued to lead as the top three destinations for foreign investment.

In contrast, overseas investment by Korean individuals and companies rose sharply, increasing 55.7 percent year-on-year to $120.8 billion in 2024.

This growth was largely driven by domestic firms expanding or establishing manufacturing facilities abroad, along with active purchases of foreign assets, such as U.S. stocks, by domestic retail investors.

As a result, the country’s ranking rose from 13th in 2023 to 10th in 2024, placing it among the top countries such as the U.S., China and Germany.

The ranking is expected to rise further this year, as the nation's outbound investment in the first quarter reached $46.2 billion, marking the highest quarterly figure since the fourth quarter of 2021, when it stood at $47.6 billion.