South Korea: Key Economic Drivers and Economic Challengers
Introduction
In the last sixty years, the Republic of Korea has experienced one of the leading economic transformations as the nation has achieved extraordinary success in combining fast economic growth with substantial poverty reduction. Today, Korea is an innovation-driven and high-income nation of just below 49.0 million people with a total GDP exceeding $1.0 trillion and per capita income of about $20,000 (World Bank 2015). South Korea has been christened the Germany of Asia as its one of the world’s top nations in terms of sustainable growth potential. This report analyses the South Korea economic growth data obtained from the World Bank databank from 2015 to 2019. Also, the report examines three main growth drivers and growth challengers based on an appropriate theory and evidence as well as viable policy recommendations for the South Korean government.
Background Information
South Korea is ranked as one of the most highly regarded nations worldwide regarding sustained economic growth and development. In the 1960s, the Korean economy began as an agriculture-based economy, and in 2016, it was ranked as the 11th biggest economy worldwide in terms of GDP. The South Korean government policies resulted in average growth of real GDP of 7.30% per annum between 1960 and 2019, and the gross national income per capita grew rapidly from USD 67 million to over USD 30,000 between 1950 and 2018 (World Bank 2019). Though, the economy’s most recent growth performance has been somewhat disappointing. The GDP growth averaged a mere 4.1% in the period 2000 to 2010, marking a substantial drop from average growth of 7.9% attained between 1960 and 2000 (Lee 2016). Between 2011 and 2015, the GDP average growth was only 3.0%.
Data Analysis
Gross domestic product is a useful measure of a nation’s economic performance, and it is used as the most commonly used indicator of economic growth and well-being. The GDP is the best measure of final production that considers the whole economic output of a country, including all goods and services produced by businesses within the country for sale (Mankiw 2021). The chart below summarizes South Korea’s economic growth data (GDP) from the World Bank database from 2015 to 2019. In 2019, South Korea’s GDP was 1,646,739.22 million, having increased from 1,466,000 million in 2015. The highest and least GDP was reported in 2018 and 2015, amounting to 1.725 trillion 1.466 trillion. But, in 2020 South Korea’s GDP contracted by 1.2% on a yearly basis in the last quarter of 2020, in comparison to a 1.10% expansion in the previous period. This was the first yearly contraction from 1998, when South Korea was amid a crippling financial crisis…Read More….
The chart below demonstrates South Korea’s GDP Annual Growth Rate for the period 2015 to 2019. It demonstrates that between 2015 and 2017, South Korea’s annual GDP growth rate increased steadily from 2.81% to 3.16%, which was the first expansion exceeding 3 % between 2015 and 2019. The economic expansion is attributed to brisk exports of local semiconductors, which accounted for about 50 per cent of the export-driven economy, mainly due to robust demand for memory chips. In 2017 and 2018, the annual GDP growth rate decreased by 2.91% to 2.1%. This is mainly attributed to the surge in government spending that boosted the economy during the fourth quarter, but weakening exports decelerated the annual growth rate to a five-year low. The exports declined mostly due to reduced shipments of electronic products and chips, partly due to a slowdown in China’s economy (Kim & Choi 2019). The U.S.-China trade war had an adverse impact on global growth, leading to lower demand for key exports items from South Korean, including memory chips and petrochemical products.