Economic OutlineEconomic OverviewFor the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19. Show
Ranking 10th among the world's largest economic powers and 4th in Asia in 2022, South Korea is famous for its spectacular rise from one of the poorest countries in the world to a developed, high-income country in just one generation. During the global financial crisis of 2007-2008, the country maintained a stable economy and even experienced economic growth during the peak of the crisis. However, the South Korean economy went into its worst year growth period in more than half a century in 2020, battered by China's economic slowdown and uncertainties over the trade war between Beijing and Washington, and the global effects of the COVID-19 pandemic. Stagnant investment and the failure to spill the boom of chip sector over into other industries already limited economic growth to an estimated 2.2% in 2019, before declining to -0.9% in 2020 and bouncing back at 4.3% in 2021. According to the IMF's October 2021 forecast, GDP growth is expected to reach 3.3% in 2022 and stabilise at 2.8% in 2023, subject to the post-pandemic global economic recovery. Despite stimulus packages, public finances have deteriorated in 2020 and 2021. The budget surplus decreased from 0.5% of GDP in 2019 to -1.5% in 2020 and 12.5% in 2021. The IMF expects the fiscal deficit will remain at -2.6% in 2022 and reach -2.3% in 2023. Public debt grew to an estimated 51.3% of GDP in 2021 and is expected to rise in the coming years at 55.1% in 2022 and 58.5% in 2023 (IMF, October 2021). Inflation is projected to stand at 1.6% in 2022, compared to 2.2% in 2021 and 0.5% in 2020. Over 2020 and 2021 the government has worked hard to boost the economy through expansionary fiscal spending, and as a result employment data showed an improvement in terms of both the number of jobs and employment status. Framework measures for industrial innovation have been completed, which cover the plans to restructure manufacturing and services, develop the new core industries of data, networks and AI, and promote the three new promising industries of a system on a chip, biohealth and future cars. The government also worked for a second venture boom, strong employment support and social safety nets, which led to improved distribution indicators, and supplementary measures to help the 52 hour workweek run smoothly. However, the private sector has not yet picked up, as well as the country's growth potential. Exports have bounced back, led by semiconductors and automobiles. Investment has held up relatively well so far, despite weak demand and high uncertainty (OECD, 2021). Corporate debt represented 101.7% of GDP in 2019 (Korea Institute of Public Finance, 2020), rising 6.3 percentage points from the previous year, the second largest increase in the world, and the high level of household debt poses a risk to the banking sector. In 2022, the country’s most immediate challenge remains related to the economic, social and public health impacts of the COVID-19 pandemic. South Korea has experienced remarkable success in combining rapid economic growth with significant reductions in poverty. Income per capita increased from USD 100 in 1963 to more than USD 31,762 today (IMF, October 2021). Although the unemployment rate was estimated very low in 2021 at 3.8% (IMF, October 2021) the number of irregular workers is very high, social inequalities are deepening and social ties are deteriorating. The government is struggling to turn employment around, even after using USD 400 million extra budget mainly for job-creation projects and is urging pension funds to invest more in small-cap Kosdaq stocks to boost innovation. In the medium and longer terms, South Korea will spend more on preparing measures to tackle the low birth rate, elderly poverty and low employment among women. The IMF expects however the unemployment rate to remain slightly affected by the negative economic impact of the COVID-19 pandemic, the rate being currently estimated to stay at 3.7% in 2022.
Source: IMF – World Economic Outlook Database, Latest available data Note: (e) Estimated Data Main Sectors of IndustrySouth Korea has experienced one of the largest economic transformations of the past 60 years. Given its limited geographical size, insufficient natural resources and population size (a labour force of 28.4 million people out of its 51.28 million population), the country has devoted special attention to technology development and innovation to promote growth, growing from a predominantly rural, agricultural nation into an urban, industrialized country. Industry represented 32.6% of the GDP and employed 25% of the workforce in 2021 (World Bank, 2022). The main industries include textile, steel, car manufacturing, shipbuilding and electronics. South Korea is the world's largest producer of semiconductors. The agricultural sector in South Korea only makes a negligible contribution to the country's GDP (1.8%) and employed only 4.8% of the active population in 2021 (World Bank, 2022). Rice is the main agricultural crop; barley, wheat, corn, soybeans and sorghum are extensively cultivated. The sector also includes large-scale livestock farming. Less than one-fourth of the land is cultivated. South Korea's mineral resources are limited to gold and silver. The service sector is the largest and fastest economic sector, accounting for 57.1% of GDP and employing 70.2% of the active population (World Bank, 2022), especially department stores, store chains and supermarkets. Tourism was one of the fast-growing sectors, with a rise of 14% in 2019 according to Korean Tourism Organization, although the number of Chinese tourists dropped drastically in the last years because of Beijing's travel ban, which has not been fully lifted. Since 2020 the country is waiting for the world's borders to open again to international travel. The COVID-19 pandemic has had a powerful impact on the global economy since 2020. Nevertheless, the global recovery continues, even if the momentum has weakened towards the end of 2021 and uncertainty has increased as the pandemic resurged, leaving lasting imprints on medium-term performance. The surge in global inflation has investors fretting about future growth, but many economists say price surges will subside, making way for 4.7% global GDP growth in 2022 (International Monetary Fund - IMF, 2022 & Morgan Stanley, 2021). The impact of the pandemic appears to have affected both sides of most sectors and markets in South Korea for the second year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.
Source: World Bank, Latest available data. Find more information about your business sector on our service Market Reports. Indicator of Economic FreedomDefinition: The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.  Business environment rankingDefinition: The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure. Score:7.50/10World Rank:24/82
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025 Country RiskSee the country risk analysis provided by Coface.
Political OutlineCurrent Political Leaders President: Yoon Suk-youl (since 10 May 2022)Prime Minister: Kim Boo-kyum (since 14 May 2021) President Yoon has nominated HAN Duck-soo to the role of prime minister)Next Election Dates Legislative: April 2024 Presidential: 2027Current Political Context The Korean-peninsula remains one of the most protracted and volatile conflict zones in the word. President Moon Jae-in has pushed the denuclearization and the 'peace economy' concept as the cornerstones of its North Korea policy. In its five-year plan, the government is working to lay the foundations for economic unification by restarting inter-Korean cooperation and seeking a single market for Seoul and Pyongyang. The purpose is to achieve peace and unification by 2045. President Moon Jae-in party has won a decisive victory in parliamentary elections in January 2020, with voters backing the government's response to the coronavirus pandemic. The ruling left-wing party is likely to press its reform agenda ahead of the next presidential election, notably on unemployment and chaebol reform. Under South Korean President Moon Jae-in and his administration, Seoul has undertaken its first unified diplomatic initiative aimed at advancing ties with India and the Association of Southeast Asian Nations (ASEAN). This policy is an extension of South Korea’s need to diversify its economic and strategic relationships amid the uncertainty posed by competition between its closest ally, the United States, and largest trading partner, China. By elevating ties with India and Southeast Asia, particularly in the economic realm, Seoul hopes to insulate itself from the risks posed by trade and strategic friction between the two great powers. Main Political Parties The re-branding of party names and party mergers have been a popular means of securing additional votes in recent years. The most influential parties are:- The Democratic (Minjo) Party : progressive - People Power Party or PPP (formerly Liberty Korea Party): right-wing - Justice Party: centre-left; organised around progressivism Type of State South Korea is a presidential republic. It is composed of 9 provinces and 6 cities with autonomous administration (Seoul, Busan, Incheon, Daegu, Gwangju, Daejeon).Executive PowerThe President is the chief of the state, head of the Government and commander-in-chief of the armed forces. He or she is elected by a popular vote for a single five-year term. The President enjoys executive powers and appoints both the Prime Minister and the State Council (cabinet) with consent of the parliament. The Prime Minister is not required to be a member of parliament and his or her main role is to assist the President.Legislative Power The legislature in South Korea is unicameral. The Parliament, called the National Assembly, has 300 seats distributed among parties in proportion to their share of the vote. Each member is elected to serve four-year terms. The executive branch of the government is directly or indirectly dependent on the support of the National Assembly, often expressed through a vote of confidence.
Indicator of Freedom of the PressDefinition: The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.). World Rank:42/180Indicator of Political FreedomDefinition: The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores. Ranking:FreePolitical Freedom:2/7Civil Liberties:2/7 Political freedom in the world (interactive map)
© Export Entreprises SA, All Rights Reserved. Which factor did not contribute to the South's failure to develop a large industrial economy?Chapter 10 - 11. What hindered industrialization in the South quizlet?Slavery posed a major obstacle to southern industrialization, but not because slaves were unfit for factories. Industrial slavery troubled southerners.
Which of the following was a consequence of cotton growing dominance over the southern economy?Growing more cotton meant an increased demand for slaves. Slaves in the Upper South became incredibly more valuable as commodities because of this demand for them in the Deep South. They were sold off in droves. This created a Second Middle Passage, the second largest forced migration in America's history.
Which of the following was true of the southern economy in the first half of the nineteenth century?During the first half of the nineteenth century, the center of economic power in the South shifted from the upper South to the lower South. The South had an inadequate transportation system and only a rudimentary financial system as late as the middle of the nineteenth century.
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Which factor did not contribute to the Souths failure to develop a large industrial economy?
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