Business in South Korea: economic snapshot August 2018 | finder.com

ECONOMIC SNAPSHOT
South Korea

Internal perspective

A strong exporting country for many years, South Korea is becoming one of the biggest e-commerce markets worldwide. More than 84% of the population has Internet access. But the recent removal of the country’s first leader in Korea’s democratic history has resulted in political unrest and a loss of faith in government. Time will tell how it affects the country’s overall economy.

Population

51,446,201 (2017)

Internet users

89.9% (2013)

Gross domestic product (GDP)

  • $1.411 trillion

Top 5 Imports

Top 5 exports

Languages

Top 3 Trading Partners

Top franchises

GDP growth rate (est.)

  • 2.738% in 2016
  • 2.8% in 2017

Trends and outlooks

  • Roughly half of the GDP centered on exports.
  • Slow growth due to low domestic consumption and investment.
  • Flourishing K-Culture commanding global interest,

Economic challenges

  • Aging population.
  • Dominance of large conglomerates.
  • Inflexible labor market.

Introduction

International Monetary Fund data from 2017 reveals South Korea as the 11th-largest economy based on nominal gross domestic product (GDP), which evaluates market prices, and 14th-largest economy based on purchasing power parity (PPP), which compares the prices of like consumer goods among countries.

With a population of around 52 million, South Korea ranks 26th in the world based on nominal GDP per capita and 30th based on GDP by PPP per capita. These measures divide nominal GDP and GDP by PPP by the country’s population.

What should I know about nominal GDP and PPP?

Among the multiple ways that economists measure a country’s economic strength, nominal GDP and PPP are two of the most common.

Nominal GDP is based on official government estimates and depends on exchange rates between two countries, typically using the US dollar for one of the denominations. It’s useful for measuring financial flows between countries. But because it doesn’t consider differences in cost of living, it can distort per capita income estimates.

PPP, on the other hand, considers the relative cost of local goods, services and inflation rates — all factors considered to reflect a country’s domestic market. Because PPP compares the costs of a common “basket of goods” — some 3,000 consumer goods that include food, fuel and insurance — it’s considered a more ideal way to project per capita income projections and gauge poverty thresholds.

Economic indicators

South Korea’s official currency is the South Korean won (KRW). It’s recently fluctuated between 1061 and 1071 KRW against the US dollar.

South Korea is a developed country known for its rapid economic expansion from the 1960s onward. It heavily depends on foreign trade to power its economy, becoming the world’s fifth-largest exporter and seventh-largest importer in 2014.

Industry accounted for almost 40% of GDP in 2010. Major industries include electronics, telecommunications, automobile production, chemicals, shipbuilding and steel production.

Agriculture accounted for less than 3% of GDP in 2010, due largely to the country’s rapid industrialization, which saw fewer people working in the country’s dwindling farmland. Rice is the primary agricultural crop, accounting for about 90% of South Korea’s farm output. The country imports most of its food.

The services sector accounted for almost 59% of GDP in 2010. South Korea is a major tourist destination, attracting around 11 million foreign visitors in 2012.

As of 2015, an estimated 3.1% of its population was unemployed.

Some 15 South Korean companies are included in the 2017 Forbes Global 500 list of top corporations.

Major contributors to the economy

South Korea is a member of the World Trade Organization, Asia-Pacific Economic Cooperation, Organization for Economic Cooperation and Development (OECD) and G20. It has free trade agreements with the US, the EU, Australia, Canada and China, among other countries. Its top trading partners include China, the US, Japan, Hong Kong, Singapore, Saudi Arabia, Qatar and Germany.

The country’s top exports include:

  • Electrical machinery and equipment
  • Vehicles
  • Machinery, including computers
  • Ships and boats
  • Plastics and plastic articles

Its major imports include:

  • Mineral fuels, including oil
  • Electrical machinery and equipment
  • Machinery, including computers
  • Optical, technical and medical apparatus
  • Vehicles

Economic prospects

South Korea is the most industrialized country in the OECD. The country’s experienced tremendous growth since the 1960s, when it began improving its industries and exporting most of its industrial output. A well-educated populace and highly skilled workforce combined to push the country’s economic expansion into a long-term trend, boosting South Korea to becoming a developed country by the late 1990s.

South Korea’s GDP growth rate averaged 10% each year between 1962 and 1994. Export growth rose by 20% a year, while savings and investment accounted for more than 30% of the country’s GDP in the same period.

South Korea has been a major source of international aid since reaching the status of a developed country. Its rapid expansion serves as an inspiration to other countries seeking to achieve their own economic miracles.

Among the challenges South Korea faces in the years ahead are an aging population, the continued dominance of chaebols or large corporations and an inflexible labor market.

Sources:

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