The Ministry of SMEs and Startups (MSS) announced its ‘2024 Startup Trends’ report on Wednesday, revealing a notable decline in new business formation amid persistent economic headwinds.

The total number of startups in South Korea stands at 1,182,905 for 2024, representing a 4.5 percent decrease from the previous year — a reduction of 55,712 businesses. This marks the continuation of a five-year downward trajectory that officials attribute to an unfavorable confluence of global and domestic factors.

“The triple challenge of high interest rates, high exchange rates, and high inflation has created a particularly difficult environment for entrepreneurs,” said a ministry spokesperson, adding that demographic pressures from low birth rates and an aging population have further complicated the business landscape.

The data shows a clear pattern of decline in entrepreneurial activity: from 1,484,667 startups in 2020 to just under 1.2 million in 2024 — a drop of over 300,000 businesses in half a decade.

Yet beneath these overarching figures lies a more nuanced picture of South Korea’s evolving economy. Several sectors managed to buck the downward trend, with personal services seeing an 8.0 percent increase, while professional and scientific services grew by 2.5 percent compared to 2023.

The water supply and waste management sector posted the most dramatic growth at 14.8 percent, suggesting increasing investment in environmental infrastructure. Meanwhile, finance and insurance services registered a healthy 4.9 percent increase.

Traditional economic pillars showed vulnerability, however. The wholesale and retail sector declined by 7.1 percent, restaurants and accommodation by 7.7 percent, and real estate — particularly affected by high interest rates — fell by 8.6 percent.

The information and communication technology sector, long considered a cornerstone of South Korea’s modern economy, experienced a concerning 9.8 percent contraction.

Monthly data revealed slight recovery signals, with five months — January, April, July, October, and December — showing year-over-year increases in new business formation.

Perhaps most telling for the future of South Korea’s economy is the age distribution of entrepreneurs. While business creation fell among younger demographics, with those under 30 seeing a precipitous 12.9 percent decline, the 60-and-over age group increased their entrepreneurial activity by 4.6 percent — the only cohort to register positive growth.

Despite the overall decline, technology-based startups are claiming an increasingly significant share of the business landscape. Although their absolute numbers decreased by 2.9 percent to 214,917, they now represent 18.2 percent of all startups — a record high proportion that has steadily increased from 15.4 percent in 2020.

This shift suggests that while quantity may be decreasing, the entrepreneurial sector may be undergoing a qualitative transformation toward more innovation-driven businesses, potentially positioning South Korea for greater economic resilience as it navigates demographic challenges and global economic uncertainty.