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Korea's Economy 


Over the last three decades, the Republic of Korea has achieved what is widely acclaimed as "the Economic Miracle on the Han-gang river."  Since Korea embarked on economic development in earnest in 1962, its economy has grown at one of the fastest paces in the world.  As a result, Korea, long one of the world's poorest agrarian societies, has emerged as an upper middle-income, fast industrializing country.

In around three decades, from 1962 to 1997, Korea's gross national product increased from US $2.3 billion to US437.4 billion, with per capita GNP soaring from US $87 to about US $9.511 at current price levels.  The key to this success was the adoption of an outward-looking development strategy making exports the engine of growth - a strategy that reflected Korea's insufficient natural endowments, its limited domestic market, and its abundant, well-educated industrious manpower.

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The economic structure was radically transformed as a result of the successful development programs implemented during these years.  The manufacturing sector increased its share of GDP from 14.4% to over 25.9% in 1996.  The commodity trade volume reached more then US $274.9 in 1996 in contrast to US $477 million in 1962.  The gross savings ration rose to 34.8 percent from 11.0 percent during the same period.

Korea's development is even more remarkable in view of its situation until the early 1960s.  Korea had been economically backward for most of its long history.  There were few significant industries before liberation from Japan's 35-year colonial rule (1910-1945), during which Korea's economic resources were ruthlessly exploited by the Japanese. 

 The Korean economy was further devastated during the Communist-provoked Korean War (1950-1953), the damage from which took a long time to heal.  As late as 1961, Korea was still suffering from the many difficulties commonly faced by less developed nations.  On top of its extreme poverty, the population was growing by 3 percent annually.  Unemployment prevailed and savings were negligible.  The nation had no notable exports, and it depended on imports for both raw materials and important manufactured goods.  

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1000_won_note.JPG (47236 bytes)
1000 Won =About $0.9US

10000_won_note.JPG (68892 bytes)
10000 Won = About $9US

 
Since the 1960s, South Korea has achieved an incredible record of growth and global integration to become a high-tech industrialized economy. Four decades ago, GDP per capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies, and currently is among the world's 20 largest economies. Initially, a system of close government and business ties, including directed credit and import restrictions, made this success possible. The government promoted the import of raw materials and technology at the expense of consumer goods, and encouraged savings and investment over consumption. The Asian financial crisis of 1997-98 exposed longstanding weaknesses in South Korea's development model including high debt/equity ratios and massive short-term foreign borrowing. GDP plunged by 6.9% in 1998, and then recovered by 9% in 1999-2000. Korea adopted numerous economic reforms following the crisis, including greater openness to foreign investment and imports. Growth moderated to about 4-5% annually between 2003 and 2007. With the global economic downturn in late 2008, South Korean GDP growth slowed to 0.2% in 2009. In the third quarter of 2009, the economy began to recover, in large part due to export growth, low interest rates, and an expansionary fiscal policy, and growth exceeded 6% in 2010. The South Korean economy's long term challenges include a rapidly aging population, inflexible labor market, and overdependence on manufacturing exports to drive economic growth.
GDP (purchasing power parity):
$1.467 trillion (2010 est.)
country comparison to the world: 13
$1.383 trillion (2009 est.)
$1.38 trillion (2008 est.)
note: data are in 2010 US dollars
GDP (official exchange rate):
$986.3 billion (2010 est.)
GDP - real growth rate:
6.1% (2010 est.)
country comparison to the world: 35
0.2% (2009 est.)
2.3% (2008 est.)
GDP - per capita (PPP):
$30,200 (2010 est.)
country comparison to the world: 45
$28,500 (2009 est.)
$28,500 (2008 est.)
note: data are in 2010 US dollars
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