Economy of South Korea

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.

Japan colonized Korea, officially annexing it on 22 August 1910 as the Province of Choson.{{Cite book |last=Li |first=Xiaobing |title=The Cold War in East Asia |date=2018 |publisher=Routledge |isbn=978-1-138-65179-1 |location=Abingdon, Oxon}}{{Rp|page=24}} Japan encouraged an inflow of Japanese capital to Korea's less developed economy.{{Rp|page=24}} A large majority of major firms in Korea became Japanese owned and operated as a result, with key positions reserved for Japanese.{{Rp|page=24}} Koreans were permitted to work in menial roles under harsh labor conditions.{{Rp|page=24}} Most of Korea's coal, iron, and crop production was shipped to Japan.{{Rp|page=24}}

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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.{{Cite web |url=https://www.pagina12.com.ar/104906-corea-del-sur-no-es-un-milagro |title=Corea del Sur no es un milagro | Un Estado muy fuerte, industrialización, extrema flexibilización laboral y conglomerados familiares. El papel de EE.UU. |date=30 March 2018 |access-date=5 March 2019 |archive-date=29 January 2019 |archive-url=https://web.archive.org/web/20190129064108/https://www.pagina12.com.ar/104906-corea-del-sur-no-es-un-milagro |url-status=live }}

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.{{Cite web |url=http://documents.worldbank.org/curated/en/975081468244550798/pdf/multi-page.pdf |title=Archived copy |access-date=30 July 2019 |archive-date=10 February 2020 |archive-url=https://web.archive.org/web/20200210154516/http://documents.worldbank.org/curated/en/975081468244550798/pdf/multi-page.pdf |url-status=live }}

South Korea's real GDP expanded by an average of more than 8 percent per year, from US$2.7 billion in 1962{{cite web|url=http://www.nationmaster.com/graph/eco_gdp-economy-gdp&date=1962|title=Countries Compared by Economy > GDP. International Statistics at NationMaster.com|work=nationmaster.com|access-date=4 March 2021|archive-date=19 May 2011|archive-url=https://web.archive.org/web/20110519125735/http://www.nationmaster.com/graph/eco_gdp-economy-gdp%26date%3D1962|url-status=live}} to US$230 billion in 1989,{{cite web |url=http://www.nationmaster.com/graph/eco_gdp-economy-gdp&date=1989 |title=Countries Compared by Economy > GDP. International Statistics at NationMaster.com |work=nationmaster.com |access-date=4 March 2021 |archive-date=11 February 2011 |archive-url=https://web.archive.org/web/20110211194900/http://www.nationmaster.com/graph/eco_gdp-economy-gdp%26date%3D1989 |url-status=live }} breaking the trillion dollar mark in the early 2000s. Nominal GDP per capita grew from $103.88 in 1962{{cite web| url=http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1962| title=Countries Compared by Economy > GDP > Per capita. International Statistics at NationMaster.com| work=nationmaster.com| access-date=4 March 2021| archive-date=18 December 2010| archive-url=https://web.archive.org/web/20101218175831/http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita%26date%3D1962| url-status=live}} to $5,438.24 in 1989,{{cite web|url=http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita&date=1989|title=Countries Compared by Economy > GDP > Per capita. International Statistics at NationMaster.com|work=nationmaster.com|access-date=4 March 2021|archive-date=6 April 2011|archive-url=https://web.archive.org/web/20110406112658/http://www.nationmaster.com/graph/eco_gdp_percap-economy-gdp-per-capita%26date%3D1989|url-status=live}} 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. In the early 1960s, South Korea's rate of growth exceeded North Korea's rate of growth in most industrial areas.{{cite report |page=4 |url=http://www.foia.cia.gov/sites/default/files/document_conversions/89801/DOC_0001218147.pdf |title=North Korean Intentions and Capabilities With Respect to South Korea |id=SNIE 14.2–67 |publisher=CIA |date=21 September 1967 |access-date=13 March 2017 |archive-date=15 November 2017 |archive-url=https://web.archive.org/web/20171115201410/https://www.cia.gov/library/readingroom/docs/DOC_0001218147.pdf |url-status=dead }}

The most significant factor in rapid industrialisation was the adoption of an outward-looking strategy in the early 1960s.Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, Palgrave Macmillan, pp.37–39. 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. 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.{{Cite book| chapter=The Developmental State in Retrospect and Prospect: Lessons from India and South Korea|last=Chibber |first=Vivek| title=The End of the Developmental State?|publisher=Routledge|year=2014|editor-last=Williams|editor-first=Michelle|pages=30–53}} By adhering to state regulations and demands, firms were awarded subsidisation and investment support to develop their export markets in the evolving international arena. 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.

Beginning in 1973, South Korea's government used its National Investment Fund and the Korea Development Bank to invest large amounts of money into what Park Chung Hee's government viewed as the six strategic industries: steel, non-ferrous metals, shipbuilding, industrial machinery, electronics, and petrochemicals.{{Cite book |last=Lan |first=Xiaohuan |title=How China Works: An Introduction to China's State-led Economic Development |publisher=Palgrave Macmillan |year=2024 |isbn=978-981-97-0079-0 |translator-last=Topp |translator-first=Gary |doi=10.1007/978-981-97-0080-6}}{{Rp|page=136}} This developmental approach was frequently criticized at the time from outside Korea, including by the World Bank.{{Rp|page=136}} The strategy was successful and ultimately also helped develop companies like Samsung and POSCO and reduced input costs for production in downstream industries as well.{{Rp|page=136}}

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.{{Cite journal|url=http://jwsr.pitt.edu/ojs/jwsr/article/view/316|archiveurl=https://web.archive.org/web/20200730234453/http://jwsr.pitt.edu/ojs/index.php/jwsr/article/view/316/328|title=The Steel and Shipbuilding Industries of South Korea: Rising East Asia and Globalization|first1=Kyoung-ho|last1=Shin|first2=Paul S.|last2=Ciccantell|date=26 August 2009|archivedate=30 July 2020|journal=Journal of World-Systems Research|pages=167–192|via=jwsr.pitt.edu|doi=10.5195/jwsr.2009.316|doi-access=free}} 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 the 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

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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.

The measures implemented early in the decade, coupled with significant improvements in the world economy, helped 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.{{Country study|url=http://countrystudies.us/south-korea/45.htm|article=South Korea: The Economy}}

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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. 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. By January 1998, the government had shut down a third of Korea's merchant banks. Throughout 1998, Korea's economy would continue to shrink quarterly at an average rate of −6.65%. 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.{{Cite journal

|title=Recovery from a financial crisis: the case of South Korea

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|first2=Sherry L.

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Actions by the South Korean government and debt swaps by international lenders have 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. 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.

South Korea's economy has 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|date=May 2020}} 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 had 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%. 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{{cite web

| title = Total Economy Database

| url = http://www.conference-board.org/economics/database.cfm

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| archive-date = 7 May 2016

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}} Thanks to industrialisation GDP per hour worked (labour output) more than tripled from US$2.80 in 1963 to US$10.00 in 1989. More recently the economy stabilised and maintained a growth rate of between 4–5% from 2003 onwards.

Led by industry and construction, growth in 2002 was 5.8%,{{cite web|title=South Korea's GDP up 5.8% for year|url=http://edition.cnn.com/2002/BUSINESS/asia/11/21/korea.gdp/index.html|website=CNN|access-date=26 February 2017|archive-date=27 February 2017|archive-url=https://web.archive.org/web/20170227150057/http://edition.cnn.com/2002/BUSINESS/asia/11/21/korea.gdp/index.html|url-status=live}} 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|date=November 2012}}

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.{{cite journal |last=Chang |first=Jaechul |title=The Contours of Korea's Economic Slowdown and Outlook for 2009 |journal=SERI Quarterly |volume=2 |issue=2 |pages=87–90 }} 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%. 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.{{cite journal |author1=Kim Kyeong-Won |author2=Kim Hwa-Nyeon |title=Global Financial Crisis Overview |journal=SERI Quarterly |volume=2 |issue=2 |pages=13–21 }} As in the 1997 Asian financial crisis, Korean currency also experienced massive fluctuations, declining by 34% against the US dollar. 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,{{cite web|url=https://www.forbes.com/2009/03/12/korea-rate-economy-markets-currency-won.html|title=Korea's Choice: Currency Or Economy?|author=Vivian Wai-yin Kwok|date=12 March 2009|work=Forbes|access-date=26 August 2017|archive-date=9 February 2019|archive-url=https://web.archive.org/web/20190209124430/https://www.forbes.com/2009/03/12/korea-rate-economy-markets-currency-won.html|url-status=live}} but South Korea was able to limit the downturn to a standstill at 0.2% in 2009.US Department of State. [https://2009-2017.state.gov/r/pa/ei/bgn/2800.htm "Background Note: South Korea"] {{Webarchive|url=https://web.archive.org/web/20190604192157/https://2009-2017.state.gov/r/pa/ei/bgn/2800.htm |date=4 June 2019 }} Despite the Great Recession, the South Korean economy, helped by timely stimulus measures and strong domestic consumption of products that compensated for decreased exports,{{cite web|url=http://english.yonhapnews.co.kr/business/2010/07/09/45/0503000000AEN20100709006500320F.HTML|title=(News Focus) Rate hike heralds start of Korea's stimulus exit|work=Yonhap News Agency|access-date=19 November 2010|archive-date=20 May 2013|archive-url=https://web.archive.org/web/20130520065613/http://english.yonhapnews.co.kr/business/2010/07/09/45/0503000000AEN20100709006500320F.HTML|url-status=live}} 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 exports 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,{{Cite web|url=http://www.adb.org/sites/default/files/ADO/2010/ado2010-update-subregional.pdf|title=The Future of Growth In Asia}} similar to growth rates of developing countries such as Brazil or Russia.{{cite web|url=http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/weorept.aspx?sy=2011&ey=2015&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=69&pr1.y=18&c=223%2C922%2C542&s=NGDP_RPCH&grp=0&a=|title=Report for Selected Countries and Subjects|work=imf.org|access-date=19 November 2010|archive-date=30 May 2016|archive-url=https://web.archive.org/web/20160530220012/http://www.imf.org/external/pubs/ft/weo/2010/02/weodata/weorept.aspx?sy=2011&ey=2015&scsm=1&ssd=1&sort=country&ds=.&br=1&pr1.x=69&pr1.y=18&c=223%2C922%2C542&s=NGDP_RPCH&grp=0&a=|url-status=live}}

File:Korea President Park Business Leaders 20130508 01.jpg at a breakfast meeting with chaebol business magnates Lee Kun-hee and Chung Mong-koo in 2013]]

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.{{cite web|title=Korea-Australia Free Trade Agreement (KAFTA) – Key outcomes |url=http://dfat.gov.au/fta/akfta/fact-sheet-key-outcomes.html |work=Department of Foreign Affairs and Trade |publisher=Australian Government |access-date=15 December 2013 |date=5 December 2013 |url-status=dead |archive-url=https://web.archive.org/web/20131215200750/http://dfat.gov.au/fta/akfta/fact-sheet-key-outcomes.html |archive-date=15 December 2013 }} 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.{{cite news|title=Lessons from South Korea's Chaebol economy|url=http://theconversation.com/lessons-from-south-koreas-chaebol-economy-20158|access-date=15 December 2013|newspaper=The Conversation Australia|date=6 December 2013|author=Nattavud Pimpa|archive-date=15 December 2013|archive-url=https://web.archive.org/web/20131215204138/http://theconversation.com/lessons-from-south-koreas-chaebol-economy-20158|url-status=live}}

The government cut the work week from six days to five in phases, from 2004 to 2011, depending on the size of the firm.{{cite web |url=http://100.naver.com/100.nhn?docid=782057 |archive-url=https://archive.today/20120714072957/http://100.naver.com/100.nhn?docid=782057 |url-status=dead |archive-date=14 July 2012 |script-title=ko:주5일근무제 : 지식백과 |language=ko |publisher=100.naver.com |access-date=14 July 2014 }} The number of public holidays was expanded to 16 by 2013.{{cite web|url=http://www.hankyung.com/news/app/newsview.php?aid=2013042600691 |script-title=ko:[시사이슈 찬반토론] 대체휴일제 부활 옳을까요 |publisher=The Korea Economic Daily |access-date=14 July 2014 |url-status=dead |archive-url=https://web.archive.org/web/20150116112518/http://www.hankyung.com/news/app/newsview.php?aid=2013042600691 |archive-date=16 January 2015 }}

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.{{cite web|url=https://www.euronews.com/2019/04/25/south-korea-economy-unexpectedly-contracts-in-first-quarter-worst-since-global-financial-crisis|title=South Korea economy unexpectedly contracts in first-quarter, worst since global financial crisis|date=25 April 2019|publisher=Euronews|access-date=25 April 2019|archive-date=25 April 2019|archive-url=https://web.archive.org/web/20190425032517/https://www.euronews.com/2019/04/25/south-korea-economy-unexpectedly-contracts-in-first-quarter-worst-since-global-financial-crisis|url-status=live}}

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.

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|date=November 2012}}

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|date=November 2012}}

South Korea today is known as the 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 today has the infrastructure to meet a density of population and culture that has the capability to create strong local particularities.{{Cite web|url=http://www.innovationiseverywhere.com/south-korean-startups-save-conglomerates/|title=Can South Korean Startups (and the government) Save its Flailing Giant Tech Conglomerates? – Innovation is Everywhere|last=Tesla|first=Agence|date=22 June 2016|language=en-US|access-date=18 July 2016|archive-date=25 September 2016|archive-url=https://web.archive.org/web/20160925080223/http://www.innovationiseverywhere.com/south-korean-startups-save-conglomerates/|url-status=live}}

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-19, 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.{{Cite web |date=2023-02-03 |title=South Korea's economy faces rising headwinds in 2023 |url=https://www.spglobal.com/marketintelligence/en/mi/research-analysis/south-koreas-economy-faces-rising-headwinds-in-2023-feb23.html |access-date=2023-10-08 |website=IHS Markit}} 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%. The government had to incur a massive fiscal spending in 2020, leading a rise in the fiscal deficit as projected in their budget.https://english.moef.go.kr/ec/selectTbEconomicDtl.do?boardCd=E0002&seq=4852 Moreover, their forecasted debt-to-GDP ratio jumped to 41.2% of GDP in 2020 from 37.1% of GDP in 2019. In 2021, the government unveiled a $29 billion extra budget to aid small businesses and boost employment.https://hr.economictimes.indiatimes.com/news/industry/south-korea-unveils-29-billion-extra-budget-to-aid-small-businesses-expects-to-add-164000-jobs/84024884 In 2024, the government forecast a debt-to-GDP ratio was 47.4% of GDP.https://english.moef.go.kr/pc/selectTbPressCenterDtl.do?boardCd=N0001&seq=5943

With downturns in many manufacturing industries, South Korea has been facing a recession. Many economists state the reason for industries' slowdown as deteriorating global conditions. 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-19, 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-19 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.{{Cite web |date=2022-02-04 |title=South Korea's strong economic performance faces post-pandemic challenges |url=https://www.eastasiaforum.org/2022/02/04/south-koreas-strong-economic-performance-faces-post-pandemic-challenges/ |access-date=2023-11-26 |website=East Asia Forum |language=en}} To stabilise the inflated economy, the government has passed the "Korean New Deal Program" to invest 144 billion dollars.{{Cite web |title=South Korea's Green New Deal in the year of transition |url=https://www.undp.org/blog/south-koreas-green-new-deal-year-transition |access-date=2023-11-26 |website=UNDP |language=en}} This expansionary fiscal policy promoted private consumption and increased 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.{{Cite web |title=New Growth Strategy 4.0: Measures to address challenges in carrying out primary projects |url=https://english.moef.go.kr/popup/20230825_policyFocus/popup.html |access-date=2023-10-08 |website=Ministry of Economy and Finance (South Korea)}} 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:

1. Foster AI semiconductor industries and build up a collaborative ecosystem between businesses.
2. Dominate the global market of the Urban Air Mobility (UAM) industry.
3. Secure Clean Hydrogen Production Technology via Water Electrolysis.
4. Advance Autonomous Driving Technologies.
5. Promote the Battery Re-manufacturing and Reuse Markets.
6. Expand the Private Sector-led My Data Based Services.
7. Streamline the Ordering Process of Research Equipment or Facilities to Alleviate Administrative Burdens.

Besides this, South Korea is one of the countries with 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.{{Cite web |last1=cycles |first1=This text provides general information Statista assumes no liability for the information given being complete or correct Due to varying update |last2=Text |first2=Statistics Can Display More up-to-Date Data Than Referenced in the |title=Topic: Medical technology in South Korea |url=https://www.statista.com/topics/9716/medical-technology-in-south-korea/ |access-date=2023-10-08 |website=Statista |language=en}}{{Cite web |title=Medical Technology - South Korea {{!}} Statista Market Forecast |url=https://www.statista.com/outlook/hmo/medical-technology/south-korea |access-date=2023-10-08 |website=Statista |language=en}} 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.{{Cite journal |last1=Choi |first1=Ji-Young |last2=Lee |first2=Hee-Jo |last3=Lee |first3=Myoung-Jin |date=2022-04-21 |title=Future Scenarios of the Data-Driven Healthcare Economy in South Korea |journal=Healthcare |volume=10 |issue=5 |pages=772 |doi=10.3390/healthcare10050772 |issn=2227-9032 |pmc=9141477 |pmid=35627908 |doi-access=free }}

In April 2025, the incorporation of Korean government bonds into the "World Government Bond Index" was postponed from November this year to April next year. After being listed as a prospective candidate for incorporation in September 2022, it was successfully included in the regular market classification report in the second half of October 2024.{{Cite web |date=2025-04-09 |script-title=ko:한국, 세계국채지수 WGBI 편입 확정…시점 내년 4월로 연기 |url=https://www.newsis.com/view/NISX20250408_0003131469 |access-date=2025-04-14 |website=Newsis |language=ko}}

{{excerpt|Economic inequality in South Korea}}

The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2022–2027). Inflation below 5% is in green.{{cite web | url=https://www.imf.org/en/Publications/WEO/weo-database/2022/October/weo-report?c=542,&s=NGDP_RPCH,NGDPD,PPPGDP,NGDPDPC,PPPPC,PCPIPCH,LUR,GGXWDG_NGDP,&sy=1980&ey=2027&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 | title=Report for Selected Countries and Subjects }}

{{static row numbers}}{{sticky header}}

{{See also|List of largest companies of South Korea|Manufacturing in South Korea|Economy of Seoul}}

File:Aerial View of Daewoo Shipbuilding & Marine Engineering.jpg

During the 1970s and 1980s, South Korea became a leading producer of ships, including oil supertankers, and oil-drilling platforms. The country's major shipbuilder was Hyundai, which built a 1-million-ton capacity drydock at Ulsan in the mid-1970s. Daewoo joined the shipbuilding industry in 1980 and finished a 1.2-million-ton facility at Okpo on Geoje Island, south of Busan, in mid-1981. The industry declined in the mid-1980s because of the oil glut and because of a worldwide recession. There was a sharp decrease in new orders in the late 1980s; new orders for 1988 totaled 3 million gross tons valued at US$1.9 billion, decreases from the previous year of 17.8 percent and 4.4 percent, respectively. These declines were caused by labour unrest, Seoul's unwillingness to provide financial assistance, and Tokyo's new low-interest export financing in support of Japanese shipbuilders. However, the South Korean shipping industry was expected to expand in the early 1990s because older ships in world fleets needed replacing.{{cite web|url=http://www.country-data.com/cgi-bin/query/r-12311.html|title=South Korea: Shipbuilding|publisher=Library of Congress|access-date=14 August 2010|archive-date=10 May 2012|archive-url=https://web.archive.org/web/20120510120426/http://www.country-data.com/cgi-bin/query/r-12311.html|url-status=live}} South Korea eventually became the world's dominant shipbuilder with a 50.6% share of the global shipbuilding market as of 2008. Notable Korean shipbuilders are Hyundai Heavy Industries, Samsung Heavy Industries, Hanwha Ocean, and the now bankrupt STX Offshore & Shipbuilding.

{{main|Electronics industry in South Korea}}

Electronics is one of South Korea's main industries. During the 1980s through the 2000s, South Korean companies such as Samsung, LG, and SK led South Korea's growth. In 2017, 17.1% of South Korea's exports were semiconductors produced by Samsung Electronics and SK Hynix. Samsung and LG are also major producers in electronic devices such as televisions, smartphones, display, and computers.

{{Main|Automotive industry in South Korea}}

File:Hyundai Sonata DN8 PE Aero Silver Matte (5).jpg automobile. The automotive line is a key sector in South Korea's industry.]]

The automobile industry was one of South Korea's major growth and export industries in the 1980s. By the late 1980s, the capacity of the South Korean motor industry had increased more than fivefold since 1984; it exceeded 1 million units in 1988. Total investment in cars and car-component manufacturing was over US$3 billion in 1989. Total production (including buses and trucks) for 1988 totaled 1.1 million units, a 10.6 percent increase over 1987, and grew to an estimated 1.3 million vehicles (predominantly passenger cars) in 1989. Almost 263,000 passenger cars were produced in 1985—a figure that grew to approximately 846,000 units in 1989. In 1988 automobile exports totaled 576,134 units, of which 480,119 units (83.3 percent) were sent to the United States. Throughout most of the late 1980s, much of the growth of South Korea's automobile industry was the result of a surge in exports; 1989 exports, however, declined 28.5 percent from 1988. This decline reflected sluggish car sales to the United States, especially at the less expensive end of the market, and labour strife at home.{{cite web|url=http://www.country-data.com/cgi-bin/query/r-12312.html|title=South Korea: Automobiles and Automotive Parts|publisher=Library of Congress|access-date=14 August 2010|archive-date=25 August 2016|archive-url=https://web.archive.org/web/20160825204042/http://www.country-data.com/cgi-bin/query/r-12312.html|url-status=live}} South Korea today has developed into one of the world's largest automobile producers. The Hyundai Motor Group is South Korea's largest automaker in terms of revenue, production units and worldwide presence.

Most of the mineral deposits on the Korean Peninsula are located in North Korea, with the South only possessing an abundance of tungsten and graphite. Coal, iron ore, and molybdenum are found in South Korea, but not in large quantities and mining operations are on a small scale. Much of South Korea's minerals and ore are imported from other countries. Most South Korean coal is anthracite that is only used for heating homes and boilers.

In 2019, South Korea was the 3rd largest world producer of bismuth,{{cite web| url = https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-bismuth.pdf| title = USGS Bismuth Production Statistics}} the 4th largest world producer of rhenium,{{cite web| url = https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-rhenium.pdf| title = USGS Rhenium Production Statistics}} and the 10th largest world producer of sulfur.{{cite web| url = https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-sulfur.pdf| title = USGS Sulfur Production Statistics}}

File:Seosan Break Water Construction (Hyundai Construction).jpg

Construction has been an important South Korean export industry since the early 1960s, and remains a critical source of foreign currency and invisible export earnings. By 1981, overseas construction projects, most of them in the Middle East, accounted for 60 percent of the work undertaken by South Korean construction companies. Contracts that year were valued at US$13.7 billion. In 1988, however, overseas construction contracts totaled only US$2.6 billion (orders from the Middle East were US$1.2 billion), a 1 percent increase over the previous year, while new orders for domestic construction projects totaled US$13.8 billion, an 8.8 percent increase over 1987. South Korean construction companies therefore concentrated on the rapidly growing domestic market in the late 1980s. By 1989, there were signs of a revival of the overseas construction market: the Dong Ah Construction Company signed a US$5.3 billion contract with Libya to build the second phase (and other subsequent phases) of Libya's Great Man-Made River Project, with a projected cost of US$27 billion when all 5 phases were completed. South Korean construction companies signed over US$7 billion of overseas contracts in 1989.{{cite web|url=http://www.country-data.com/cgi-bin/query/r-12314.html|title=South Korea: Construction|publisher=Library of Congress|access-date=14 August 2010|archive-date=5 March 2016|archive-url=https://web.archive.org/web/20160305033134/http://www.country-data.com/cgi-bin/query/r-12314.html|url-status=live}} South Korea's largest construction companies include Samsung C&T Corporation, which built some of the highest buildings and most noteworthy skyscrapers such as three consecutively the world's tallest buildings: the Petronas Towers, Taipei 101, and the Burj Khalifa.{{cite book|url=https://books.google.com/books?id=4thCrpuz6v0C&q=samsung+construction+Taipei+101&pg=PA51|title=Civil Engineer's Handbook of Professional Practice|isbn=9780470901649|last1=Hansen|first1=Karen|last2=Zenobia|first2=Kent|date=31 March 2011|publisher=John Wiley & Sons |access-date=10 November 2020|archive-date=4 March 2021|archive-url=https://web.archive.org/web/20210304090056/https://books.google.com/books?id=4thCrpuz6v0C&q=samsung+construction+Taipei+101&pg=PA51|url-status=live}}{{cite web|url=http://www.secc.co.kr/eng/html/biz/building.asp|title=Building -- Samsung C&T|access-date=11 June 2016|archive-date=21 September 2016|archive-url=https://web.archive.org/web/20160921182441/http://www.secc.co.kr/eng/html/biz/building.asp|url-status=live}}

File:US Navy 100727-N-2013O-128 An SH-60F Sea Hawk helicopter flies by Dokdo (LPH 6111).jpg

{{Main|Defense industry of South Korea}}

During the 1960s, South Korea was dependent on the United States to supply its armed forces, but after the elaboration of President Richard M. Nixon's policy of Vietnamisation in the early 1970s, South Korea began to manufacture its own weapons.{{cite web|url=http://www.country-data.com/cgi-bin/query/r-12313.html|title=South Korea: Armaments|publisher=Library of Congress|access-date=14 August 2010|archive-date=4 March 2016|archive-url=https://web.archive.org/web/20160304201657/http://www.country-data.com/cgi-bin/query/r-12313.html|url-status=live}}

Since the 1980s, South Korea has begun exporting military equipment and technology to boost its international trade. Some of its key military export projects include the T-155 Firtina self-propelled artillery for Turkey; the K11 air-burst rifle for the United Arab Emirates; the Bangabandhu class guided-missile frigate for Bangladesh; fleet tankers such as Sirius class for the navies of Australia, New Zealand, and Venezuela; Makassar class amphibious assault ships for Indonesia; and the KT-1 trainer aircraft for Turkey, Indonesia, and Peru.

South Korea also exports various core components of other countries' advanced military hardware. Those hardware include modern aircraft such as F-15K fighters and AH-64 attack helicopters which will be used by Singapore, whose airframes will be built by Korea Aerospace Industries in a joint-production deal with Boeing.{{cite web|url=http://www.koreaaero.com/english/business/fuselage_01.asp|title=KAI Major Programs: Airframe|publisher=Korea Aerospace Industries|access-date=14 August 2010|archive-url=https://web.archive.org/web/20170809130914/http://www.koreaaero.com/english/business/fuselage_01.asp|archive-date=9 August 2017|url-status=dead}} In other major outsourcing and joint-production deals, South Korea has jointly produced the S-300 air defence system of Russia via Samsung Group,{{Failed verification|date=August 2019}} and will facilitate the sales of Mistral class amphibious assault ships to Russia that will be produced by STX Corporation.{{cite news|url=https://www.bbc.co.uk/news/world-europe-10740291|title=France to sell two Mistral-class warships to Russia|publisher=BBC|date=23 July 2010|access-date=21 June 2018|archive-date=12 February 2019|archive-url=https://web.archive.org/web/20190212193455/https://www.bbc.co.uk/news/world-europe-10740291|url-status=live}} The deal was cancelled in 2014 due to Russia's actions in Ukraine and the ships were sold to Egypt instead.

{{Citation|title=Los Angeles Times| date=6 August 2015 |url=https://www.latimes.com/world/europe/la-fg-france-cancels-sale-warships-to-russia-20150806-story.html#:~:text=France%20is%20looking%20for%20a,deliver%20the%20vessels%20to%20Russia.}} South Korea's defence exports were $1.03 billion in 2008 and $1.17 billion in 2009.{{cite news|url=https://www.koreatimes.co.kr/www/news/nation/2010/08/205_67771.html|title=Korea emerges as arms development powerhouse|newspaper=The Korea Times|access-date=12 November 2015|archive-date=30 November 2016|archive-url=https://web.archive.org/web/20161130111459/https://www.koreatimes.co.kr/www/news/nation/2010/08/205_67771.html|url-status=live}}

{{Main|Tourism in South Korea}}

In 2012, 11.1 million foreign tourists visited South Korea, making it one of the most visited countries in the world,{{Cite web|url=http://www.tourismroi.com/Content_Attachments/27670/File_633513750035785076.pdf |title=UNTWO World Tourism Barometer, Vol.5 No.2 |access-date=15 October 2008 |last=UNTWO |date=June 2008 |url-status=dead |archive-url=https://web.archive.org/web/20080819191518/http://www.tourismroi.com/Content_Attachments/27670/File_633513750035785076.pdf |archive-date=19 August 2008 }} up from 8.5 million in 2010.{{cite news|url=https://www.nytimes.com/2010/11/11/business/global/11iht-sk-hotel.html?src=busln|newspaper=The New York Times|date=11 November 2010|title=South Korea Sets Its Sights on Foreign Tourists|access-date=24 February 2017|archive-date=22 July 2016|archive-url=https://web.archive.org/web/20160722052156/http://www.nytimes.com/2010/11/11/business/global/11iht-sk-hotel.html?src=busln|url-status=live}} Many tourists from all around Asia visit South Korea which has been due to the rise of the Korean Wave (Hallyu).

Seoul is the principal tourist destination for visitors; popular tourist destinations outside of Seoul include the major coastal city of Busan, the Seorak-san national park, the historic city of Gyeongju, and subtropical Jeju Island.

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Since 1991, there has been a steady upwards trend in South Korean M&A until 2018 with only a short break around 2004. Since 1991, around 18,300 deals in, into or out of South Korea have been announced, which sum up to a total value of over 941 bil. USD. 2016 has been the year with the largest deal value (1,818 in bil. USD) and the most deals (82,3).{{Cite news|url=https://imaa-institute.org/m-and-a-statistics-countries/|title=M&A Statistics by Countries – Institute for Mergers, Acquisitions and Alliances (IMAA)|work=Institute for Mergers, Acquisitions and Alliances (IMAA)|access-date=27 February 2018|language=en-US|archive-date=27 November 2020|archive-url=https://web.archive.org/web/20201127222829/https://imaa-institute.org/m-and-a-statistics-countries/|url-status=live}}

Target industries are distributed very evenly with no industry taking a larger share than 10%. The top three target industries are electronics (9.7%), semiconductors (9.1%) and metals and mining (7.7%). However, over 51% of the acquiring companies originate from the financial and brokerage sector.{{citation needed|date=January 2019}}

{{Portal|South Korea|Business|Money}}

• Korean Wave
• List of banks in South Korea
• List of companies of South Korea
• List of largest companies of South Korea
• List of South Korean regions by GDP
• Agriculture in South Korea
• Poverty in South Korea
• Retailing in South Korea
• Trade unions in South Korea
• Unemployment in South Korea
• Work–life balance in South Korea
• Youth unemployment in South Korea
• Small and medium-sized enterprises in South Korea

{{Reflist|30em}}

• Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, London: Palgrave Macmillan. {{ISBN|978-3-319-71769-2}}.
• {{cite book |editor=Lee-Jay Cho |editor2=Somi Seong |editor3=Sang-Hyop Lee |title=Institutional and Policy Reforms to Enhance Corporate Efficiency in Korea |location=Seoul |publisher=Korea Development Institute |year=2007 |isbn=978-89-8063-305-0 }}
• {{cite book |author=O. Yul Kwon |title=The Korean Economy in Transition: An Institutional Perspective |year=2010 |location=Northampton, MA |publisher=Edward Elgar |isbn=978-1-84064-268-1 }}
• {{cite book |editor=T. Youn-Ja Shim |title=Korean Entrepreneurship: The Foundation of the Korean Economy |location=New York |publisher=Palgrave Macmillan |year=2010 |isbn=978-0-230-10707-6 }} Essays on such topics as American-educated technocrats in the 1960s and their role in South Korea's economic growth, and entrepreneurial family companies in South Korea, as well as China and Japan.

{{Commons category|Economy of South Korea}}

• [http://kostat.go.kr/portal/eng/index.action Statistics Korea]
• [https://english.moef.go.kr/ Ministry of Economy and Finance (South Korea)]
• [https://unipass.customs.go.kr/ets/index_eng.do Korea Customs Service]
• [https://ecos.bok.or.kr/EIndex_en.jsp Bank Of Korea] {{Webarchive|url=https://web.archive.org/web/20170617120242/http://ecos.bok.or.kr/EIndex_en.jsp |date=17 June 2017 }}
• [http://wits.worldbank.org/CountryProfile/en/Country/KOR/Year/2015/Summary World Bank Summary Trade Statistics South Korea]
• [http://www.oecd.org/korea/ South Korea – OECD]
• [https://www.cia.gov/the-world-factbook/countries/korea-south/ South Korea profile] at the CIA World Factbook
• [http://www.worldbank.org/en/country/korea South Korea profile] at The World Bank

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