Asia and Oceania

Korea, Republic of (South Korea)
Last reviewed: 1 June 2009

Country information

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ECONOMY

Basic economic facts

GDP: US $969.9 billion (2007)
GDP per head: US $20,045 (2007)
Real GDP growth: 5.0% (2007)
Inflation: 2.1% (2006)
Major industries: Steel, Shipbuilding, Automotive, Electronics, Machinery
Major trading partners: China, US, EU and Japan UK is second largest trading partner among EU members.
Aid and development: The ROK is an emerging donor with an aid programme worth 0.09% of GNI in 2007. Aid volumes are scheduled to grow rapidly in the coming years.
Exchange rate: £1 = 1,958.70 KRW (January 2009)

The ROK was one of the Asian 'miracle' economies. With its economy based on agriculture, the ROK was probably the poorer of the two Koreas until the start of the 1970s. However, from the start of the first economic development plans in 1962, the ROK was able to maintain annual growth at an average of 8% for three decades. With this rapid growth, the ROK was the world's eleventh largest economy by 1997.

However, problems surfaced in January 1997 with the collapse of Hanbo Steel, the flagship company of one of Korea's largest chaebol (conglomerates). The effects of the Asian financial crisis were felt towards the end of the year with falls in the value of stocks and the won accelerating. The situation deteriorated until the central bank had to abandon its efforts to support the won and the government was reluctantly forced in December 1997 to appeal to the IMF for a $57bn rescue package.

Elected in late 1997, President Kim Dae-jung, committed the ROK to the conditions imposed by the IMF. In 1998, the economy underwent severe contraction, with per capita GDP falling to $6,200 (lower than in 1991) and unemployment hitting 8% in the 'IMF recession'. Owing to the government's policy commitment, the ROK stock market was the world's best performer in dollar terms in 1998 and, by 2000, real growth had rebounded to just over 8%. Despite a temporary slowdown in 2001 due in part to external factors and to fears that the Government's commitment to economic reform was waning GDP grew by 3%, year-on-year. Despite the political situation on the Korean peninsula and the outbreak of SARS in the region, 2003 saw sustained growth of 3%, with ROK exporters receiving a strong boost from China's own economic expansion. The current global economic downturn has had major effects on the ROK with President Lee warning that the target of 3% growth in 2008 could prove unattainable and with the economy in 2009 expected to decline further than the 3.3% predicted in November 2008.

South Korea was ranked the 13th largest economy in the world in GDP terms in 2006 (source World Bank).

To maintain competitiveness in a rapidly changing global environment, the ROK has been actively pursuing FTA's with large economies and economic blocs. South Korea has FTA's with Chile, Singapore and EFTA currently in force and has signed FTA's with ASEAN (Goods and services) and the US (which are still awaiting ratification). FTA negotiations with the UEU, Canada, India, Mexico, and Japan are also underway.