Economic Growth and Development in South Korea
Background Information
Key Macro Data (2015)
Latest annual GDP
Growth (%)
Aspects of Development
Currency unit
Won
Exchange rate system
Float
Policy interest rate
Latest HDI ranking
15/187
1.5%
Income inequality HDI
ranking
19/187
Member of a Regional
Trade Agreement
Many
FTAs
Gender inequality HDI
ranking
17/187
3.6%
Current account
balance (% of GDP)
+6%
< 2%
Fiscal balance
(% of GDP)
% of population living
in extreme poverty
0.5
Main corporate tax
rate (Per Cent)
24%
Life Expectancy at
birth (years)
81
Govt debt (% of GDP)
53%
Competitiveness rank
26/144
0.32
Corruption Perception
Ranking
Gini coefficient (Latest
published estimate)
43/175
Inward FDI (% of GDP)
0.9%
GDP or GNI per capita
(US $, PPP)
Inflation (%)
Unemployment rate
(% of labour force)
Yield on 10-Yr Govt
Bonds (Per Cent)
3.7%
$33K
2
2
Investment
(% of GDP)
31%
Ease of Doing Business
Ranking
5/189
0.5%
Gross national savings
(% of GDP)
Remittances (% of
GDP)
35%
External Debt
(% of GDP)
27%
Aid (% of GDP)
Donor
Contextual Background on South Korean Economy
Economic Structure
Development and Growth Issues / Policies
Share of GDP by value added (% of GDP)
3 factors limiting development progress
Primary: 2%
1/ Subjective well-being low – many suicides
Industrial: 39% (strong manufacturing sector)
2/ Ageing population + many are poor
Services: 59%
3/ Workforce = 18m of pop of > 50 million
Main export industries (+ major firms)
3 policies used to improve the supply-side
1/ Machinery / transport equipment
1/ Attempts to stimulate SMEs/start-ups
2/ Electronic / computing manufactures
2/ FTAs with EU + USA + China + Vietnam
3/ Chemicals and related products
3/ Reforms to improve lab market flexibility
Key risks to sustainable growth
Long term challenges facing this country
1/ Chinese slowdown & falling Japanese Yen
Challenge 1: Shift to a new style of growth
2/ High household debt & youth jobless rate
Challenge 2: Costs of possible reunification
3/ Low labour market participation (just 55%)
Challenge 3: Reform of corporate oligopolies
Main Strengths and Weaknesses for South Korea
Competitive Strengths
Main Weaknesses in their Economy
1/ High income and diversified economy
1/ Corporate oligopolies – too powerful?
2/ Structural trade (external) surplus
2/ Relative weaknesses in creative services
3/ Low unemployment + low stable inflation
3/ Exposed to events in China and Japan
4/ High ranking for ease of doing business
4/ SMEs not as dynamic as western nations
5/ 6th largest export economy in the world
5/ Polarized lab market + long working hours
Other Notes
Other Useful Contextual Knowledge
It is 7th most complex economy in the world
Heavily urbanized (80% plus and rising)
Successfully navigated “middle income trap”
Strong & scaled manufacturing industries
Has avoided a full-blown recession since 1997
– one of few countries to do so since 2007
Rich enough now to be an overseas aid donor
Tremendously high rankings on Science and
Maths scores in educational tests (PISA)
Labour market is widely regarded as too
inflexible – firms find it hard to get rid of
older workers, growing dissatisfaction
among the young – rising social tensions
Service sector productivity is only half that
of manufacturing industry
South Korea has agreed a number of free
trade agreements including China, Vietnam
and New Zealand, the EU and the USA