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.jpeg) Seoul, the largest metropolis of South Korea | |
| Currency | South Korean won (KRW, ₩) |
|---|---|
| 1 January – 31 December | |
Trade organizations | APEC, WTO, RCEP, OECD, G-20 |
Country group | |
| Statistics | |
| Population | 51,628,117 (2022) |
| GDP | |
| GDP rank | |
GDP growth |
|
GDP per capita | |
GDP per capita rank | |
GDP by sector |
|
| 2.5% (2024)[3] | |
Population below poverty line | 14.4% (2016 est.)[4] |
 35.5 medium (2017)[5] | |
| 63 out of 100 points (2023, 32nd rank) | |
Labor force | |
Labor force by occupation |
|
| Unemployment | |
Average gross salary | 4,147,925 ₩ / $3,211.14 monthly[11] (2022) |
| 3,490,724 ₩ / $2,702.36 monthly[12][13] (2022) | |
Main industries |
|
| External | |
| Exports |  $632.4 billion (2023)[14] |
Export goods |
|
Main export partners |
|
| Imports | $642.6 billion (2023)[14] |
Import goods |
|
Main import partners |
|
FDI stock | |
| $68 billion (2020)[8] | |
Gross external debt |  $542.4 billion (2020)[16] |
| Public finances | |
| 39.8% of GDP (2020)[17] | |
| -3.5% of GDP (2020)[17] | |
| Revenues | $428.7 billion (2020)[17] |
| Expenses | $456.5 billion (2020)[17] |
| Economic aid | ODA, $2.4 Billion (donor) (2018) aid to North Korea excluded |
 $458.700 billion (July 2021 est.)[4] | |
All values, unless otherwise stated, are in US dollars. | |
| History |
|---|
| Business culture |
| Industries |
| Regional |
| Related topics |
The economy of South Korea is a highly developed mixed economy.[20][21][22] By nominal GDP, the economy was worth ₩2.24 quadrillion (US$1.72 trillion). It has the 4th largest economy in Asia and the 14th largest in the world as of 2024.[3] South Korea is notable for its rapid economic development from an underdeveloped nation to a developed, high-income country in a few generations. This economic growth has been described as the Miracle on the Han River,[23] which has allowed it to join the OECD and the G20. It is included in the group of Next Eleven countries as having the potential to play a dominant role in the global economy by the middle of the 21st century.[24] Among OECD members, South Korea has a highly efficient and strong social security system; social expenditure stood at roughly 15.5% of GDP.[25][26][27] South Korea spends around 4.93% of GDP on advance research and development across various sectors of the economy.[28][29]
South Korea's education system and the establishment of a motivated and educated populace were largely responsible for spurring the country's high technology boom and economic development.[30] South Korea began to adapt an export-oriented economic strategy to fuel its economy. In 2022, South Korea was the ninth largest exporter and ninth largest importer in the world. The Bank of Korea and the Korea Development Institute periodically release major economic indicators and economic trends of the economy of South Korea.[31][32]
Renowned financial organisations, such as the International Monetary Fund, notes the resilience of the South Korean economy against various economic crises. They cite the country's economic advantages as reasons for this resilience, including low state debt, and high fiscal reserves that can quickly be mobilised to address any expected financial emergencies.[33] Other financial organisations, like the World Bank, describe South Korea as one of the fastest-growing major economies of the next generation, along with BRICS and Indonesia.[34] South Korea was one of the few developed countries that was able to avoid a recession during the Great Recession.[35] Its economic growth rate reached 6.2% in 2010, a recovery from economic growth rates of 2.3% in 2008 and 0.2% in 2009, during the Great Recession. The South Korean economy again recovered with the record-surplus of US$70.7 billion mark of the current account at the end of 2013, up 47 percent growth from 2012. This growth contrasted with the uncertainties of the global economic turmoil, with the country's major economic output being the technology products exports.[36]
Despite the South Korean economy's high growth and structural stability, South Korea is experiencing damage to its credit rating in the stock market due to North Korea in times of military crises. The recurring conflict affects the financial markets of its economy.[37][38][39][40][41]
History
Overview
Following the Korean War, South Korea remained a country with less developed markets for a little more than a decade. The growth of the industrial sector was the principal stimulus to South Korea's economic development. In 1986, manufacturing industries accounted for approximately 30 percent of the gross domestic product (GDP) and 25 percent of the work force. Due to strong domestic encouragement and some foreign aid, Seoul's industrialists introduced modern technologies into outmoded or newly built facilities, increased the production of commodities—especially those for sale in foreign markets—and plowed the proceeds back into further industrial expansion. As a result, industry altered South Korea's landscape, drawing millions of labourers to urban manufacturing centres.
A downturn in the South Korean economy in 1989 spurred by a decrease in exports and foreign orders caused concern in the industrial sector. Ministry of Trade and Industry analysts stated that decreased export performance resulted from structural problems, including an overly strong won, increased wages and labour costs, frequent strikes, and higher interest rates. The result was an increase in inventories and cutbacks in production at a number of electronics, automobile, and textile manufacturers, as well as at the smaller firms that supplied the parts. Factory automation systems were introduced to reduce dependence on labour, to boost productivity with a smaller work force, and to improve competitiveness.
Rapid growth from 1960s to 1980s
Following the coup that brought General Park Chung Hee to power in 1961, which at first caused political instability and an economic crisis, a protectionist economic policy began, pushing a bourgeoisie that developed in the shadow of the State to reactivate the internal market. To promote development, a policy of export-oriented industrialisation was applied, closing the entry into the country of all kinds of foreign products, except raw materials. Agrarian reforms were carried out and Park nationalised the financial system to swell the powerful state arm, whose intervention in the economy was through five-year plans.[42]
The spearhead was the chaebols, diversified family conglomerates such as Hyundai, Samsung, and LG Corporation, which received state incentives such as tax breaks, legality for their exploitation system and cheap or free financing: the state bank facilitated the planning of concentrated loans by item according to each five-year plan, and by economic group selected to lead it.
South Korea received donations from the United States due to the Cold War, and foreign economic and military support continued for some years. Chaebols started to dominate the domestic economy and, eventually, began to become internationally competitive. Under these chaebols, workers began to see their wages and working conditions improve, which increased domestic consumption. By the 1980s, the country rose from low income to middle income.[43]
South Korea's real GDP expanded by an average of more than 8 percent per year,[44] from US$2.7 billion in 1962[45] to US$230 billion in 1989,[46] breaking the trillion dollar mark in the early 2000s. Nominal GDP per capita grew from $103.88 in 1962[47] to $5,438.24 in 1989,[48] reaching the $20,000 milestone in 2006. The manufacturing sector grew from 14.3 percent of the GNP in 1962 to 30.3 percent in 1987. Commodity trade volume rose from US$480 million in 1962 to a projected US$127.9 billion in 1990. The ratio of domestic savings to GNP grew from 3.3 percent in 1962 to 35.8 percent in 1989.[44] In the early 1960s, South Korea's rate of growth exceeded North Korea's rate of growth in most industrial areas.[49]
The most significant factor in rapid industrialisation was the adoption of an outward-looking strategy in the early 1960s.[50][44] This strategy was particularly well-suited to that time because of South Korea's low savings rate and small domestic market. The strategy promoted economic growth through labour-intensive manufactured exports, in which South Korea could develop a competitive advantage. Government initiatives played an important role in this process.[44] Through the model of export-led industrialisation, the South Korean government incentivised corporations to develop new technology and upgrade productive efficiency to compete the global market.[51] By adhering to state regulations and demands, firms were awarded subsidisation and investment support to develop their export markets in the evolving international arena.[51] In addition, the inflow of foreign capital was encouraged to supplement the shortage of domestic savings. These efforts enabled South Korea to achieve growth in exports and subsequent increases in income.[44]
By emphasising the industrial sector, Seoul's export-oriented development strategy left the rural sector barely touched. The steel and shipbuilding industries in particular played key roles in developing South Korea's economy during this time.[52] Except for mining, most industries were located in the urban areas of the northwest and southeast. Heavy industries were located in the south of the country. Factories in Seoul contributed over 25 percent of all manufacturing value-added in 1978; taken together with factories in surrounding Gyeonggi Province, factories in the Seoul area produced 46 percent of all manufacturing that year. Factories in Seoul and Gyeonggi Province employed 48 percent of the nation's 2.1 million factory workers. Increased income disparity between the industrial and agricultural sectors became a problem by the 1970s despite government efforts to raise farm income and improve rural areas [44]
In the early 1980s, in order to control inflation, a conservative monetary policy and tight fiscal measures were adopted. Growth of the money supply was reduced from the 30 percent level of the 1970s to 15 percent. During this time, Seoul froze its budget for a short while. Government intervention in the economy was greatly reduced and policies on imports and foreign investment were liberalised to promote competition. To reduce the imbalance between rural and urban sectors, Seoul expanded investments in public projects, such as roads and communications facilities, while further promoting farm mechanisation.[44]
The measures implemented early in the decade, coupled with significant improvements in the world economy, helped the South Korea regain its lost momentum. South Korea achieved an average of 9.2 percent real growth between 1982 and 1987 and 12.5 percent between 1986 and 1988. The double-digit inflation of the 1970s was brought under control. Wholesale price inflation averaged 2.1 percent per year from 1980 through 1988; consumer prices increased by an average of 4.7 percent annually. Seoul achieved its first significant surplus in its balance of payments in 1986 and recorded a US$7.7 billion and a US$11.4 billion surplus in 1987 and 1988 respectively. This development permitted South Korea to begin reducing its level of foreign debt. The trade surplus for 1989, however, was only US$4.6 billion, and a small negative balance was projected for 1990.[44]
1990s and the Asian Financial Crisis
For the first half of the 1990s, the South Korean economy continued a stable and strong growth in both private consumption and GDP. During the 1997 Asian financial crisis, after several other Asian currencies were attacked by speculators, the Korean won started to depreciate in October 1997.[53] The problem was exacerbated due to non-performing loans at many of Korea's merchant banks. By December 1997, the IMF had approved a US$21 billion loan, that would be part of a US$58.4 billion bailout plan.[53] By January 1998, the government had shut down a third of Korea's merchant banks.[53] Throughout 1998, Korea's economy would continue to shrink quarterly at an average rate of −6.65%.[53] and South Korean chaebol Daewoo was dismantled by the government in 1999 due to debt problems. General Motors managed to purchase the motors division. Indian conglomerate Tata Group, purchased the trucks and heavy vehicles division of Daewoo.[53]
Actions by the South Korean government and debt swaps by international lenders contained the country's financial problems. Much of South Korea's recovery from the 1997 Asian financial crisis can be attributed to labour adjustments (i.e. a dynamic and productive labour market with flexible wage rates) and alternative funding sources.[53] By the first quarter of 1999, GDP growth had risen to 5.4%, and strong growth thereafter combined with deflationary pressure on the currency led to a yearly growth of 10.5%. In December 1999, President Kim Dae-jung declared the currency crisis over.[53]
2000s
South Korea's economy moved away from a centrally planned, government-directed investment model toward a more market-oriented one. These economic reforms, pushed by President Kim Dae-jung, helped South Korea maintain one of Asia's few expanding economies [citation needed], with growth rates of 10.8% in 1999 and 9.2% in 2000. Growth fell back to 3.3% in 2001 because of the slowing global economy, decreased exports, and perceptions that corporate and financial reforms have stalled.
After the bounce back from the 1997 Asian financial crisis, the economy continued strong growth in 2000 with a GDP growth of 9.08%.[53] However, the South Korean economy was affected by the September 11 attacks. The slowing global economy, falling exports, and the perception that corporate and financial reforms had stalled caused growth to decrease to 3.8% in 2001[54] Thanks to industrialisation GDP per hour worked (labour output) more than tripled from US$2.80 in 1963 to US$10.00 in 1989.[54] More recently the economy stabilised and maintain a growth rate between 4–5% from 2003 onwards.[54]
Led by industry and construction, growth in 2002 was 5.8%,[55] despite anemic global growth. The restructuring of chaebols, bank privatisation, and the creation of a more liberalised economy—with a mechanism for bankrupt firms to exit the market—remain an unfinished reform task. Growth slowed in 2003, but production expanded 5% in 2006, due to popular demand for key export products such as HDTVs and mobile phones.[citation needed]
Like most industrialised economies, South Korea experienced setbacks during the Great Recession. Growth fell by 3.4% in the fourth quarter of 2008 from the previous quarter, the first negative quarterly growth in 10 years, with year on year quarterly growth continuing to be negative into 2009.[56] Many sectors of the economy at the time reported declines, with manufacturing dropping 25.6% as of January 2009, and consumer goods sales dropping 3.1%.[56] Exports in autos and semiconductors, two pillars of the economy, shrank 55.9% and 46.9% respectively, while exports overall fell by a record 33.8% in January, and 18.3% in February 2009 year on year.[57] As in the 1997 Asian financial crisis, Korean currency also experienced massive fluctuations, declining by 34% against the US dollar.[57] Annual growth in the economy slowed to 2.3% in 2008, and was expected to drop to as low as −4.5% by Goldman Sachs,[58] but South Korea was able to limit the downturn to a standstill at 0.2% in 2009.[59] Despite the Great Recession, the South Korean economy, helped by timely stimulus measures and strong domestic consumption of products that compensated for decreased exports,[60] was able to avoid a recession unlike most industrialised economies, posting positive economic growth for two consecutive years of the crisis. In 2010, South Korea made an economic rebound with a growth rate of 6.1%, signaling a return of the economy to pre-crisis levels. South Korea's export has recorded $424 billion in the first eleven months of the year 2010, already higher than its export in the whole year of 2008. The South Korean economy of the 21st century, as a Next Eleven economy, is expected to grow from 3.9% to 4.2% annually between 2011 and 2030,[61] similar to growth rates of developing countries such as Brazil or Russia.[62]
The South Korean government signed the Korea-Australia Free Trade Agreement (KAFTA) on 5 December 2013, with the Australian government seeking to benefit its industries—including automotive, services, and resources and energy—and position itself alongside competitors, such as the U.S. and ASEAN.[63] South Korea is Australia's third largest export market and fourth largest trading partner with a 2012 trade value of A$32 billion. The agreement contains an Investor State Dispute Settlement (ISDS) clause that permits legal action from South Korean corporations against the Australian government if their trade rights are infringed upon.[64]
The government cut the work week from six days to five in phases, from 2004 to 2011, depending on the size of the firm.[65] The number of public holidays was expanded to 16 by 2013.[66]
South Korean economy decreased in the first quarter of 2019, which happened to be its worst drop since the Great Recession. GDP declined a seasonally adjusted 0.3 percent from the previous quarter.[67]
South Korea's prices rose more than 6 percent in July compared with last year, the fastest jump in nearly a quarter century.
In July 2022, South Korea's Consumer price index rose 6.3 percent, the highest rate since November 1998.
High-tech industries in the 1990s and 2000s
In 1990, South Korean manufacturers planned a shift in future production plans toward high-technology industries. In June 1989, panels of government officials, scholars, and business leaders held planning sessions on the production of such goods as new materials, mechatronics—including industrial robotics—bioengineering, microelectronics, fine chemistry, and aerospace. This shift in emphasis, however, did not mean an immediate decline in heavy industries such as automobile and ship production, which had dominated the economy in the 1980s.[citation needed]
South Korea relies upon exports to fuel the growth of its economy, with finished products such as electronics, textiles, ships, automobiles, and steel being some of its most important exports. Although the import market has liberalised in recent years, the agricultural market has remained protectionist due to disparities in the price of domestic agricultural products such as rice with the international market. As of 2005, the price of rice in South Korea was four times that of the average price of rice on the international market, and it was believed that opening the agricultural market would affect South Korean agricultural sector negatively. In late 2004, however, an agreement was reached with the WTO in which South Korean rice imports will gradually increase from 4% to 8% of consumption by 2014. In addition, up to 30% of imported rice will be made available directly to consumers by 2010, where previously imported rice was only used for processed foods. Following 2014, the South Korean rice market will be fully opened.[citation needed]
South Korea today is known as a Launchpad of a mature mobile market, where developers thrive in a market where few technology constraints exist. There is a growing trend of inventions of new types of media or apps, using the 4G and 5G internet infrastructure in South Korea. South Korea has today the infrastructures to meet a density of population and culture that has the capability to create strong local particularity.[68]
Post-COVID economy
South Korea faced a turning point in its economy in 2023. With the constant growth of mainland China's manufacturing industry and the impact of Covid, South Korea's manufacturing sector is experiencing a consistent decline. According to SP Global, South Korea's export of manufactured goods to mainland China, one of the biggest trading partners of South Korea, had decreased by 4.4% in the fourth quarter of 2022 and by 31% in January 2023.[69] On the other hand, their primary electronic manufacturing industry is facing a downturn. While information and communication technology maintained 34% of South Korea's total 2022 exports, at the end of the year, it decreased to 24%.[69]
With downturns in many manufacturing industries, South Korea has been facing a recession. Many economists state the reason for industries’ slowdown as the deteriorating global condition. The inflation rate in South Korea is regularly rising, and the problems in the domestic economy, such as household debt, population problems, and productivity problems, are the key fiscal and monetary factors that hold South Korea's economic growth.
Due to the sudden evolution of COVID, private consumption decreased, and a bottleneck in the supply sector occurred. With this situation, the Bank of Korea indicated that the consumer inflation rate rose about three percent after COVID evolved. Assuming that South Korea's interest rate was low compared to other countries, raising house prices and household debt became one of the problems in South Korea's economy.[70] To stabilise the inflated economy, the government has passed the “Korean New Deal Program” to invest 144 billion dollars.[71] This expansionary fiscal policy promoted private consumption and increase the number of jobs. This expansionary fiscal stimulus is designed to recover the economic and social impact of COVID-19 from the existing climate and environmental dangers. The New Deal policy is divided explicitly into healthcare and green industries.
South Korea's Ministry of Economy and Finance asserted the New Growth Strategy 4.0 in August 2023. The New Growth Strategy suggests projects for South Korea's long term industry growth.[72] The South Korean government advocates these policies as a New Growth 4.0 project, which aims to generate tangible outcomes in the future by setting the focus of policy and investments towards emerging industries. To achieve these goals, the strategy outlines the following key guidelines:
- Foster AI semiconductor industries and build up a collaborative ecosystem between businesses.
- Dominate the global market of the Urban Air Mobility (UAM) industry.
- Secure Clean Hydrogen Production Technology via Water Electrolysis.
- Advance Autonomous Driving Technologies.
- Promote the Battery Re-manufacturing and Reuse Markets.
- Expand the Private Sector-led My Data Based Services.
- Streamline the Ordering Process of Research Equipment or Facilities to Alleviate Administrative Burdens.
Besides this, South Korea is one of the countries that have excellent healthcare systems, biomedical technology, and AI technology. While South Korea's value in the medical industry is projected at around 6.7 billion dollars, the medical technology market is projected to reach 11.5 billion dollars.[73][74] The annual projected growth rate of the medical industry is over 6%, which indicates a bright future for the industry. Many economists suggest that by adopting AI technology, South Korea will be a bio-medical industry-leading country. An article about the future data-driven healthcare industry in South Korea suggests that AI technology helps the medical industry provide customised medical services for patients and can utilise the benefits and costs.[75]
Economic inequality
Data
The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2022–2027). Inflation below 5% is in green.[77]
| Year | GDP
(in Bil. US$PPP) |
GDP per capita
(in US$ PPP) |
GDP
(in Bil. US$nominal) |
GDP per capita
(in US$ nominal) |
GDP growth
(real) |
Inflation rate
(in Percent) |
Unemployment
(in Percent) |
Government debt
(in % of GDP) |
|---|---|---|---|---|---|---|---|---|
| 1980 | 82.7 | 2,169.4 | 65.4 | 1,714.6 | -1.6%
|
28.7%
|
5.2% | n/a |
| 1981 | 97.1
|
2,507.3
|
72.9
|
1,883.5
|
7.2%
|
21.4%
|
 4.5%
|
n/a |
| 1982 | 111.7
|
2,839.9
|
78.3
|
1,992.3
|
8.3%
|
7.2%
|
4.1%
|
n/a |
| 1983 | 131.6
|
3,296.9
|
87.8
|
2,198.9
|
13.4%
|
3.4%
|
4.1%
|
n/a |
| 1984 | 150.7
|
3,730.0
|
97.5
|
2,413.3
|
10.6%
|
2.3%
|
3.9%
|
n/a |
| 1985 | 167.7
|
4,109.0
|
101.3
|
2,482.4
|
7.8%
|
2.5%
|
4.0%
|
n/a |
| 1986 | 190.4
|
4,620.3
|
116.8
|
2,834.9
|
11.3%
|
2.8%
|
3.8%
|
n/a |
| 1987 | 220.0
|
5,284.7
|
147.9
|
3,554.6
|
12.7%
|
3.0%
|
3.1%
|
n/a |
| 1988 | 255.0
|
6,067.2
|
199.6
|
4,748.7
|
12.0%
|
7.1%
|
2.5%
|
n/a |
| 1989 | 283.8
|
6,684.6
|
246.9
|
5,817.1
|
7.1%
|
5.7%
|
2.6%
|
n/a |
| 1990 | 323.5
|
7,545.1
|
283.4
|
6,610.0
|
9.9%
|
8.6%
|
2.5%
|
3.2%
|
| 1991 | 370.4
|
8,555.9
|
330.7
|
7,637.2
|
10.8%
|
9.3%
|
2.5%
|
12.3%
|
| 1992 | 402.4
|
9,197.2
|
355.5
|
8,126.5
|
6.2%
|
6.2%
|
2.5%
|
12.0%
|
| 1993 | 440.2
|
9,961.0
|
392.7
|
8,886.4
|
6.9%
|
4.8%
|
2.9%
|
11.2%
|
| 1994 | 491.3
|
11,005.5
|
463.4
|
10,381.2
|
9.3%
|
6.3%
|
2.5%
|
10.0%
|
| 1995 | 549.8
|
12,193.2
|
566.6
|
12,565.0
|
9.6%
|
4.5%
|
2.1%
|
8.8%
|
| 1996 | 604.1
|
13,269.2
|
610.2
|
13,402.9
|
7.9%
|
4.9%
|
2.1%
|
8.1%
|
| 1997 | 652.4
|
14,197.2
|
570.6
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