This study note covers aspects of growth and development in South Korea
South Korea is one of the most highly regarded countries in the world when it comes to sustained growth and development. In each of the last five decades, the average annual rate of growth has exceeded 5% and the economy is now an innovation-driven, high-income country of just under 49 million people with a total GDP in excess of $1 trillion and a per capita income of over $20,000 (PPP adjusted).
The South Korean economy accounts for 2% of world GDP and the economy is making progress in converging towards Japanese income levels. Some commentators have christened South Korea the “Germany of Asia". Jim O'Neill, the creator of the BRICs acronym regards South Korea as a top nation in terms of sustained growth potential.
One of the strengths of South Korea is her scores on a range of competitiveness indicators. The percentage of national income given over to research and development (R&D) has grown and a rising percentage of exports come from hi-technology products. South Korea has outpaced countries such as Taiwan in moving towards high value-added manufacturing products. The economy boasts some world class businesses including Samsung, Hyundai, LG and Kia Motors. Exports account for over 50% of GDP and two thirds of South Korean exports go to developing nations. Trade with China has grown rapidly.
The economy is relatively open for foreign trade and investment, but the South Korean economic model has not been built on free market principles. Much of the early growth was supported by import tariffs as part of an import substitution policy.
In nearly every year since 1996 the annual increase in exports of goods and services has easily outpaced the growth of GDP – leading to a sustained rise in the share of exports in South Korean national income.
Human Development Progress for South Korea
A key development challenge for middle-income countries is to achieve a process of export transition away from lower value-added products towards goods and services that command higher premium prices in advanced nation markets. South Korea appears to have made this transition well – Samsung is a major competitor to Apple Inc for example – and exports to emerging countries are growing strongly
Unlike many middle income and newly established higher income countries, South Korea's manufacturing industry has seen a rising share of national income
South Korea and Regional Trade Agreements
Korea's integration in the world economy is still low in terms of import penetration, the share of foreign workers and the stock of inward FDI. Korea has taken steps to enhance its openness through free trade agreements (FTAs), including those with the EU and the United States. FTAs may also help boost the stock of inward FDI from its 2010 level of 13% of GDP, the third lowest in the OECD area. Moreover, FDI in services is only 6% of GDP in Korea compared with an OECD average of 37%.
South Korea and US Living Standards – An Example of Income Convergence
|Date||Relative to Japan (%)||Relative to the United States (%)|
|Source: OECD (2012), Going for Growth 2012|
Key Development Indicators for South Korea
|Selection of Key Indicators for South Korea||Unit||2004||2006||2008||2010||2011|
|Production and income|
|GDP per capita||USD current PPPs||21 624||24 247||26 689||28 797||30 254|
|Gross national income (GNI) per capita||USD current PPPs||21 688||24 284||26 888||28 834||30 336|
|Real GDP growth||Annual growth %||4.6||5.2||2.3||6.3||3.6|
|Net saving rate in household disposable income||%||9.2||5.2||2.9||4.3||3.1|
|Government deficit||% of GDP||2.7||3.9||3.0||1.3||..|
|General government debt||% of GDP||23.3||28.6||29.9||34.2||36.0|
|Total tax revenue||% of GDP||23.3||25.0||26.5||25.1||..|
|Imports of goods and services||% of GDP||36.7||38.3||54.2||49.7||54.1|
|Exports of goods and services||% of GDP||40.9||39.7||53.0||52.3||56.2|
|Goods trade balance||Bln USD||29.4||16.1||-13.3||41.2||30.8|
|Inflation rate: all items||Annual growth %||3.6||2.2||4.7||2.9||4.0|
|Long-term interest rates||%||4.73||5.15||5.57||4.77||4.20|
|Unemployment rate: total labour force||%||3.7||3.5||3.2||3.7||3.4|
|Total population||'000 persons||48 039||48 372||48 949||49 410||49 779|
|Population growth rates||%||0.4||0.5||0.7||0.5||0.7|
|Total fertility rates||Children||1.2||1.1||1.2||1.2||..|
|Youth population aged less than 15||% of population||19.7||18.6||17.3||16.1||15.6|
|Elderly population aged 65 and over||% of population||8.7||9.5||10.3||11.0||11.4|
|Life expectancy at birth||Years||78.0||79.0||79.9||80.7||..|
|Infant mortality||Per '000||..||4.1||3.5||3.2||..|
|Overweight and obese aged 15 and over||% of population||..||..||..||30.2||..|
|Suicide rates||Per 100 000 persons||17.7||15.9||19.4||21.4||..|
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