South Korea’s overall economic freedom ranking fell to 17th from 14th in this year’s Heritage Foundation Index of Economic Freedom, with its lowest score in the labor market category, where it ranked 100th.

According to the Korea Enterprises Federation on Monday, the 2025 Index of Economic Freedom, published by the conservative US think tank the Heritage Foundation, gave South Korea an overall score of 74 out of 100 — an increase from 73.1 the previous year. However, the country dropped three spots to 17th among 184 economies in the global ranking.

Among 40 Asia-Pacific nations, it placed fifth, after Singapore, Taiwan, Australia and New Zealand.

The annual report assesses economic freedom using 12 indicators across four broad areas: rule of law, regulatory efficiency, government size and open markets. Countries are then categorized into five levels: free, mostly free, moderately free, mostly unfree and repressed.

The labor market received the lowest score at 56.4, followed by taxation at 59.6, placing both categories in the mostly unfree classification. The labor market ranking dropped 13 spots from 87th last year to 100th this year.

Compared to the Group of Seven (G7) countries, Korea's score was higher than Germany's (53.3) but lagged behind other nations, including the United States (77.0), Italy (70.7), Canada (69.4), Japan (67.8), Britain (63.2) and France (60.2).

“The country’s economic dynamism will inevitably be affected by the outcome of the current political turmoil,” the report stated, while noting that South Korea’s economy has yet remained resilient, driven by a competitive private sector.

The KEF attributed South Korea’s low score on the labor market to its rigidity, warning that it weakens economic competitiveness, calling for labor regulation reforms and improvements in labor-management relations.

By No Kyung-min (minmin@heraldcorp.com)