Visitors receive startup consultations at the 2025 Seoul Cafe & Bakery Fair at Seoul Trade Exhibition and Convention in Gangnam District, Seoul, Feb. 19. Yonhap
The number of new businesses founded in Korea in 2024 was the lowest since the data was first compiled in 2016 amid the deepening economic downturn, the Ministry of SMEs and Startups said Friday.
High interest rates, foreign exchange rate fluctuations and inflation, which have weakened consumer spending, along with low birthrates and an aging population, contributed to the decline, according to the ministry.
The number of new businesses founded last year totaled 1.18 million, a 4.5 percent decline from the previous year. This is the lowest figure since 2016, when the number stood at 1.19 million.
The downward trend has persisted over the past five years, with the number of startups falling from 1.48 million in 2020 to 1.42 million in 2021, 1.32 million in 2022, 1.24 million in 2023 and 1.18 million last year.
By industry, the number of new businesses declined in wholesale and retail by 7.1 percent, accommodation and food services by 7.7 percent and real estate by 8.6 percent.
The decrease in wholesale and retail startups was influenced by the economic downturn, weakened consumer spending and the collapse of e-commerce platforms TMON and WeMakePrice.
The two companies filed for corporate rehabilitation with the Seoul Bankruptcy Court in July last year after failing to make payments to vendors and provide refunds to customers amid a liquidity crisis.
In accommodation and food services, rising costs driven by the prolonged effects of high interest rates, a weakening won and inflation, along with reduced consumer purchasing power and intensified competition, led to fewer new businesses.
“The challenging economic conditions, including high inflation, high interest rates, a sluggish real estate market, rising raw material costs and weakened domestic demand, appear to have had a combined impact,” a ministry official said.
Acting President Choi Sang-mok, center, speaks with young entrepreneurs and startup representatives at the Government Complex Seoul, Feb. 5. Yonhap
Experts are raising concerns that sluggish startup activity negatively impacts the job market.
As of 2021, the number of small and medium-sized enterprises was 7.71 million, representing 99.9 percent of all businesses, while those firms employed a total of 18.49 million people, accounting for 80.9 percent of the entire workforce.
Kim Dae-jong, a professor at Sejong University's School of Business, said such statistics underscore the direct link between startup growth and job creation.
“With the decline in startup activity, the employment rate for university graduates has dropped to a concerning level,” he said.
The professor cited excessive regulation as a key factor behind the decline in new business formation, noting that innovative platform businesses such as Uber and Tada have struggled to establish themselves in Korea due to regulatory barriers, whereas, in other countries, such services have helped create jobs.
He also pointed to the country's high corporate tax rate, which exceeds the OECD average, as a factor hindering entrepreneurship. “Korea needs to ease restrictions, particularly in industries related to the Fourth Industrial Revolution,” he said. “Without an improved business environment, neither startup growth nor job creation is likely to occur.”
Meanwhile, new business formation increased in certain sectors, including patient caregiving and other personal services, which rose by 8 percent, and business facility management, which grew by 3 percent, driven by rising demand for private caregiving, building management and cleaning services.