Economy of South Korea
Template:Short description Template:About Template:Update Template:Use dmy dates Template:Use American English Template:Infobox economy Template:South Korean economy South Korea has a highly developed mixed economy.<ref>Template:Cite web</ref><ref>Template:Cite web</ref><ref>Template:Cite book</ref> By nominal GDP, the economy was worth Template:KRW (US$1.87 trillion). It has the 4th largest economy in Asia and the 13th largest in the world as of 2025.<ref name="IMFWEODE" /> South Korea is notable for its rapid economic development from an underdeveloped nation to a developed, high-income country in a few decades. This economic growth has been described as the Miracle on the Han River,<ref>Template:Cite book</ref> which has allowed it to join the OECD and the G20. It is included in the group of Next Eleven countries as having the potential to play a dominant role in the global economy by the middle of the 21st century.<ref>Template:Cite book</ref> Among OECD members, South Korea has a highly efficient and strong social security system; social expenditure stood at roughly 15.5% of GDP.<ref name="Kenworthy">Template:Cite journal</ref><ref name="Bradley et al.">Template:Cite journal</ref><ref>Template:Cite web</ref> South Korea spends around 4.93% of GDP on advanced research and development across various sectors of the economy.<ref>Template:Cite web</ref><ref name="unctad">Template:Cite web</ref>
South Korea's education system and the establishment of a motivated and educated populace were largely responsible for spurring the country's high technology boom and economic development.<ref>Template:Cite web</ref> South Korea began to adapt an export-oriented economic strategy in the 1960s to fuel its economy.<ref>Template:Cite web</ref> In 2022, South Korea was the ninth largest exporter and ninth largest importer in the world. The Bank of Korea and the Korea Development Institute periodically release major economic indicators and economic trends of the economy of South Korea.<ref>Template:Cite web</ref><ref>Template:Cite web</ref>
Renowned financial organisations, such as the International Monetary Fund, note the resilience of the South Korean economy against various economic crises. They cite the country's economic advantages as reasons for this resilience, including low state debt and high fiscal reserves that can quickly be mobilised to address any expected financial emergencies.<ref>Template:Cite web</ref> South Korea was one of the few developed countries that was able to avoid a recession during the Great Recession.<ref>Template:Cite magazine</ref> Despite the South Korean economy's high growth and structural stability, South Korea is experiencing damage to its credit rating in the stock market due to North Korea in times of military crises. The recurring conflict affects the financial markets of its economy.<ref name="kcredit">Template:Cite news</ref><ref>Template:Cite web</ref><ref>Template:Cite web</ref><ref>Template:Cite web</ref><ref>Template:Cite web</ref> The South Korean economy faces challenges due to a declining and ageing population, with a fertility rate among the lowest in the world.
History
Overview
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.
Colonial period
Japan colonized Korea, officially annexing it on 22 August 1910 as the Province of Choson.<ref name=":02">Template:Cite book</ref>Template:Rp Japan encouraged an inflow of Japanese capital to Korea's less developed economy.<ref name=":02" />Template:Rp A large majority of major firms in Korea became Japanese owned and operated as a result, with key positions reserved for Japanese.<ref name=":02" />Template:Rp Koreans were permitted to work in menial roles under harsh labor conditions.<ref name=":02" />Template:Rp Most of Korea's coal, iron, and crop production was shipped to Japan.<ref name=":02" />Template:Rp
Rapid growth from 1960s to 1980s
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.<ref>Template:Cite web</ref>
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.<ref>Template:Cite web</ref>
South Korea's real GDP expanded by an average of more than 8 percent per year,<ref name=loc/> from US$2.7 billion in 1962<ref>Template:Cite web</ref> to US$230 billion in 1989,<ref>Template:Cite web</ref> breaking the trillion dollar mark in the early 2000s. Nominal GDP per capita grew from $103.88 in 1962<ref>Template:Cite web</ref> to $5,438.24 in 1989,<ref>Template:Cite web</ref> 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.<ref name=loc/> In the early 1960s, South Korea's rate of growth exceeded North Korea's rate of growth in most industrial areas.<ref name=foia-19670921>Template:Cite report</ref>
The most significant factor in rapid industrialisation was the adoption of an outward-looking strategy in the early 1960s.<ref>Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, Palgrave Macmillan, pp.37–39.</ref><ref name=loc/> 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.<ref name=loc/> Entrepreneurs such as Kim Hyung-mok were key figures in supporting industrial growth by investing in education and infrastructure aligned with the state’s economic goals. 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.<ref name=":0">Template:Cite book</ref> By adhering to state regulations and demands, firms were awarded subsidisation and investment support to develop their export markets in the evolving international arena.<ref name=":0" /> 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.<ref name=loc/>
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.<ref name=":62">Template:Cite book</ref>Template:Rp This developmental approach was frequently criticized at the time from outside Korea, including by the World Bank.<ref name=":62" />Template:Rp 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.<ref name=":62" />Template:Rp
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.<ref>Template:Cite journal</ref> 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 <ref name=loc/>
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.<ref name=loc/>
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.<ref name=loc>Template:Country study</ref>
1990s and the Asian Financial Crisis
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.<ref name="a" /> 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.<ref name="a" /> By January 1998, the government had shut down a third of Korea's merchant banks.<ref name="a" /> Throughout 1998, Korea's economy would continue to shrink quarterly at an average rate of −6.65%.<ref name="a" /> 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.<ref name="a">Template:Cite journal</ref>
Actions by the South Korean government and debt swaps by international lenders 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.<ref name="a" /> 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.<ref name="a" />
2000s
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,<ref>Template:Cite web</ref> 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%.<ref name="a" /> 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<ref name="b">Template:Cite web</ref> Thanks to industrialisation GDP per hour worked (labour output) more than tripled from US$2.80 in 1963 to US$10.00 in 1989.<ref name="b" /> More recently the economy stabilised and maintained a growth rate of between 4–5% from 2003 onwards.<ref name="b" />
Led by industry and construction, growth in 2002 was 5.8%,<ref>Template:Cite web</ref> 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.Template:Citation needed
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.<ref name=chang>Template:Cite journal</ref> 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%.<ref name=chang /> 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.<ref name=kkw>Template:Cite journal</ref> As in the 1997 Asian financial crisis, Korean currency also experienced massive fluctuations, declining by 34% against the US dollar.<ref name=kkw/> 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,<ref>Template:Cite web</ref> but South Korea was able to limit the downturn to a standstill at 0.2% in 2009.<ref>US Department of State. "Background Note: South Korea" Template:Webarchive</ref> Despite the Great Recession, the South Korean economy, helped by timely stimulus measures and strong domestic consumption of products that compensated for decreased exports,<ref>Template:Cite web</ref> 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 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.<ref>Template:Cite web</ref> 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.<ref>Template:Cite news</ref>
The government cut the work week from six days to five in phases, from 2004 to 2011, depending on the size of the firm.<ref>Template:Cite web</ref> The number of public holidays was expanded to 16 by 2013.<ref>Template:Cite web</ref>
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.<ref>Template:Cite web</ref>
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.
High-tech industries in the 1990s and 2000s
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.Template:Citation needed
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.Template:Citation needed
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.<ref>Template:Cite web</ref>
The economy after the COVID-19 pandemic
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.<ref name="auto">Template:Cite web</ref> 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%.<ref name="auto"/> The government had to incur a massive fiscal spending in 2020, leading a rise in the fiscal deficit as projected in their budget.<ref>Template:Cite web</ref> 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.<ref>Template:Cite web</ref> In 2024, the government forecast a debt-to-GDP ratio was 47.4% of GDP.<ref>Template:Cite web</ref>
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.<ref>Template:Cite web</ref>
Experts assessed the Moon Jae-in administration (2020–2022) as implementing a comprehensive set of economic policies to address the economic crisis induced by COVID-19. A wide array of industrial and employment support measures was introduced to mitigate the pandemic's economic impact [<ref>Republic of Korea Policy Briefing. (2021, June 16). Four years of the Moon Jae-in administration: Achievements and challenges of economic policy. Ministry of Culture, Sports and Tourism. https://www.korea.kr/briefing/policyBriefingView.do?newsId=148888815</ref>]. Employment retention subsidies were expanded, targeting sectors severely affected by COVID-19, such as aviation, tourism, and accommodation. Partial wage support was provided when companies opted for short-term suspension or furlough rather than layoffs [<ref>KOTRA Foreign Investment Ombudsman. (2020, March 27). [Press release] For the first time, up to 90% employment maintenance subsidy provided for all industries. KOTRA Foreign Investment Ombudsman. https://ombudsman.kotra.or.kr/ob-kr/bbs/i-2623/detail.do?ntt_sn=525</ref>]. In addition, experts evaluated the introduction of the Emergency Employment Stabilization Support System, which provided up to 1.5 million won per month to specially employed workers and freelancers who were not previously covered by employment insurance [<ref>Eroun.net. (2020, April 22). 930,000 freelancers to receive ‘Emergency Employment Security Subsidy’. Eroun.net. https://www.eroun.net/news/articleView.html?idxno=11433</ref>]. Youth employment and short-term job creation programs were also expanded, implementing labor market measures to promote youth employment and alleviate short-term unemployment pressures [<ref>Republic of Korea Policy Briefing. (2021, April 13). President Moon: “Young people face bleak times due to COVID-19…take special measures.” https://www.korea.kr/briefing/policyBriefingView.do?newsId=148886181</ref>].
Regarding industrial policy, experts assessed that the establishment of the Key Industry Stabilization Fund (approximately 40 trillion won) contributed to preventing insolvency in critical sectors such as aviation and shipping, thereby enhancing overall economic stability [<ref>Republic of Korea Policy Briefing. (2021, September 17). ‘Compensation for losses’ for small business owners under gathering bans and business restrictions…Enforcement decree passed by Cabinet. https://www.korea.kr/news/cultureColumnView.do?newsId=148893323</ref>]. During the easing of social distancing measures, private consumption was promoted through campaigns targeting consumer sectors, including tourism and dining, while an integrated strategy was implemented to maintain the K-Quarantine system and simultaneously restore consumption and employment. Differentiated support measures were applied according to social distancing levels, and in 2021, the Small Business Loss Compensation Act was enacted, which is considered to have compensated for direct economic losses. During the period of eased restrictions, various initiatives, including discount coupons, were implemented to stimulate consumption in the tourism, accommodation, and dining sectors [<ref>Presidential Archives of the Republic of Korea. Crisis response establishing Korea as a model nation – Case studies of crisis management under the Moon Jae-in administration (4). Web Archive. http://webarchives.pa.go.kr/19th/report.president.go.kr/story/view/4</ref>].
Furthermore, the Korean New Deal program promoted large-scale investments in digital and green industries. Experts assessed that it enhanced the competitiveness of advanced industries such as AI, semiconductors, urban air mobility (UAM), clean hydrogen, autonomous driving, battery recycling, and MyData-based services, while facilitating industrial restructuring [<ref>Go, E. (2022, January 25). Last year’s economic growth rate reached 4%…“This year, the economy continues to recover” [Comprehensive]. Korea Economic Daily. https://www.hankyung.com/article/2022012518666?utm</ref>]. While these measures provided a short-term economic cushion, they reportedly imposed fiscal burdens and contributed to inflationary pressures.
The government's response to the COVID-19 pandemic is evaluated as having achieved a rapid and robust recovery through the implementation of multifaceted economic policies designed to bolster domestic demand and mitigate economic disruption. Experts estimated that private consumption grew by 3.6% in 2021, recovering from the severe contraction in 2020, while facility investment increased by 8.3% in 2021 [<ref>Go, E. (2022, January 25). Last year’s economic growth rate reached 4%…“This year, the economy continues to recover” [Comprehensive]. Korea Economic Daily. https://www.hankyung.com/article/2022012518666?utm</ref>]. Exports reportedly reached a record high of $644.5 billion, driven by the global economic recovery, increased semiconductor demand, and government support [<ref>Korea Economic Daily. (2022, January 1). Korea’s exports make new history…USD 644.5 billion, highest ever. https://www.hankyung.com/amp/2022010189455</ref>]. This performance is cited as evidence of Korea’s recognition as a model country in crisis response, given its relatively low negative growth rate among G20 and OECD member countries and its rapid recovery of economic scale to pre-crisis levels [<ref>Presidential Archives of the Republic of Korea. Crisis response establishing Korea as a model nation – Economy: Case studies of crisis management under the Moon Jae-in administration. Web Archive. http://webarchives.pa.go.kr/19th/report.president.go.kr/story/view/2</ref>]. Experts also noted Korea's success in mitigating the overall economic impact, supporting small businesses, driving export-oriented growth, and accelerating the transition to a digital economy, thereby fostering development in sectors associated with the Fourth Industrial Revolution.
The Yoon Seok-yeol administration (2022–April 2025) was assessed as implementing a multifaceted policy framework aimed at post-COVID-19 economic recovery, restoring fiscal soundness, and transforming industrial structures. To address high inflation, the government reportedly expanded the energy voucher program for low-income households to alleviate heating costs [<ref>Republic of Korea Policy Briefing. (2023, January 27). [Policy at a glance] Expansion of heating cost support…Who is eligible for the ‘Energy Voucher’? https://www.korea.kr/news/policyNewsView.do?newsId=148910984</ref>]. Loan maturity extensions and repayment deferrals (2022–2024) were provided to small and medium-sized enterprises and the self-employed, and interest rate reduction programs were implemented for young people and financially vulnerable groups to mitigate financial burdens [<ref>Lee, B. (2022, July 14). President Yoon: “The burden of interest rate hikes should not be passed on to vulnerable groups and socially disadvantaged.” Republic of Korea Policy Briefing. https://www.korea.kr/news/cultureColumnView.do?newsId=148903534</ref>]. To stabilize consumer prices, the Consumer Price Stabilization Committee was established, and customized measures were introduced to secure essential living expenses, including discount coupons for agricultural, livestock, and fishery products [<ref>Republic of Korea Policy Briefing. (2024, April 2). President Yoon: “Unlimited and indefinite emergency fund for agricultural and livestock price stabilization.” https://www.korea.kr/news/policyNewsView.do?newsId=148927757&pWise=mSub&pWiseSub=C10</ref>].
Experts assessed that a market-led growth strategy was pursued to transform industrial structures and attract investment, thereby strengthening the role of the private sector. Large-scale regulatory reforms and investment promotion policies were implemented, with the objective of enhancing national competitiveness by fostering strategic industries such as semiconductors and secondary batteries. To increase public spending efficiency, a shift toward private-sector-led development was emphasized. Regarding labor market and social safety net policies, the expansion of employment insurance coverage for platform and non-regular workers, as well as programs supporting asset accumulation and youth employment (e.g., the Youth Leap Account), were implemented [<ref>Kim, S. (2024, April 2). The Youth Leap Account aims for ‘mid- to long-term asset formation for youth’…“It is both a campaign promise and a national task of the current administration.” JoongAng Ilbo. https://www.joongang.co.kr/article/25168598</ref>]. Furthermore, the promotion of advanced industries under the New Growth Strategy 4.0 was actively pursued, reportedly achieving outcomes in both export recovery and structural industrial transformation [<ref>Republic of Korea Policy Briefing. (2023, June 30). Leap toward solving national future food sources: 15 projects of the New Growth 4.0 Strategy. https://www.korea.kr/news/policyNewsView.do?newsId=148917050</ref>].
Despite challenging domestic and international conditions, including high inflation and elevated interest rates following the COVID-19 pandemic, the Yoon Seok-yeol administration implemented various economic measures, including strengthened fiscal support and private-sector-led growth initiatives. Experts particularly evaluated the targeted fiscal support for small business owners and the self-employed as effective in improving the business environment and fostering a shift toward private-sector-driven growth. However, the overall impact of these policies was perceived as limited, and evaluations of their effectiveness were mixed.
The Moon Jae-in administration’s COVID-19 economic measures are assessed as having focused on short-term economic stabilization and direct support, with an emphasis on economic recovery and consumption revitalization through targeted interventions for affected industries. Experts noted that financial support for SMEs, the self-employed, and youth job creation programs provided immediate economic relief. In contrast, the Yoon Seok-yeol administration emphasized long-term industrial competitiveness and structural transformation. Experts highlighted that the administration sought to foster strategic industries such as semiconductors and secondary batteries, establish a cutting-edge industrial ecosystem under the New Growth Strategy 4.0, and promote investment in emerging industries, including urban air mobility (UAM), clean hydrogen, autonomous driving, battery recycling, and MyData-based services. This focus on private-sector-led growth and structural industrial transformation laid the foundation for sustained, long-term economic growth.
Consequently, the Moon Jae-in administration is characterized by its focus on supporting existing industries impacted by the pandemic and providing short-term, direct economic relief. The Yoon Seok-yeol administration, by contrast, expanded policy scope to prioritize the development of strategic, advanced industries and structural industrial transformation.
The forthcoming Lee Jae-myung administration is expected to prioritize the development of future-oriented industries, including AI, secondary batteries, biotechnology, and clean energy, as central components of its economic policy agenda. Experts predict that these sectors, as advanced technology-based strategic industries, will strengthen domestic manufacturing competitiveness, secure new growth engines, and play a pivotal role in creating high value-added employment and transforming industrial structures [<ref>Lee, N. (2025, August 13). ‘Blueprint of the Lee Jae-myung administration’: 123 national projects announced…People’s constitutional amendment, strategic implementation. Money S. https://www.moneys.co.kr/article/2025081313433577193</ref>]. In particular, AI and data-driven industries are expected to be crucial for long-term economic growth and international competitiveness, by enhancing productivity, enabling customized services, and achieving global market leadership. Therefore, experts anticipate that the Lee Jae-myung administration's policy emphasis on fostering future-oriented industries represents a strategic investment in structural recovery and sustainable, long-term economic growth, rather than a short-term economic stimulus.
To stabilise the inflated economy, the government has passed the "Korean New Deal Program" to invest 144 billion dollars.<ref>Template:Cite web</ref> 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.<ref>Template:Cite web</ref> 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:
- Foster AI semiconductor industries and build up a collaborative ecosystem between businesses.
- Dominate the global market of the Urban Air Mobility (UAM) industry.
- Secure Clean Hydrogen Production Technology via Water Electrolysis.
- Advance Autonomous Driving Technologies.
- Promote the Battery Re-manufacturing and Reuse Markets.
- Expand the Private Sector-led My Data Based Services.
- 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.<ref>Template:Cite web</ref><ref>Template:Cite web</ref> 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.<ref>Template:Cite journal</ref>
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.<ref>Template:Cite web</ref>
Economic inequality
Data
The following table shows the main economic indicators in 1980–2021 (with IMF staff estimates in 2022–2027). Inflation below 5% is in green.<ref>Template:Cite web</ref> Template:Static row numbersTemplate:Sticky header
Sectors
Government finance
In 2023, Government expenditure in South Korea accounted for 35% of its GDP.<ref>Template:Cite web</ref> The total amount of Government expenditure has increased significantly since the 1990s. From the 1960s to the 1980s, when Korea's economic development was concentrated, the government's finances were mainly focused on economic development. The proportion of government finances devoted to social development was relatively insignificant. The government's fiscal scale gradually expanded, and in 1981, ‘Consolidated Fiscal scale’ as a Percentage of GDP reached 23.1%, but the government implemented a strong fiscal austerity policy aimed at economic stability, and the relative fiscal scale shrank significantly to the 15% range. Although the targeted price stability was achieved, the reduced government finance could not fulfill its original function, and the social development sector, which was relatively out of interest in government expenditure, was hit hard. Under these circumstances, the expansionary fiscal stance has been promoted "for the normalization of fiscal functions" since the 1990s. Kim Young-sam administration, which was launched in 1993, increased the tax burden to support the expansionary finances. Since then, Kim Dae Jung administration and Roh Moo Hyun administration have also continued to expand fiscal spending through tax increase. This also led to an increase in welfare expenditure. Kim Dae Jung administration established a welfare system by introducing the National Basic Livelihood Security System, and Roh Moo Hyun administration set an annual welfare expenditure growth rate of 10% and tried to allocate budget to the welfare sector first. The tax increase policy changed in the Lee Myung Bak government. In 2008, Lee Myung Bak government implemented a tax reduction policy that significantly lowered the tax rates of income tax, corporate tax, and comprehensive real estate holding tax. Park Geun Hye administration adopted ‘no-tax increase’ policy stance, continuing the Lee Myung Bak administration's tax reduction stance.<ref>Template:Cite journal</ref>
The role of government finance in the national economy is growing, and government expenditure keeps increasing. But the growth rate of the national budget varies across administrations, reflecting shifts in fiscal policy between expansionary and austerity stances. Under the Moon Jae-in administration, the 'year-on-year growth rate of the national budget' steadily increased after its inauguration in 2017, reaching nearly 9% from 2019 onward. However, with the transition to the Yoon Suk-yeol administration, the growth rate slowed to around 5% and further declined to approximately 2.5% in 2025 budget. Lee Jae-myung administration has allocated a record-high budget of 728 trillion KRW for 2026, with the year-on-year growth rate rising again to around 8%.<ref>Template:Cite news</ref>
Shipbuilding
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.<ref>Template:Cite web</ref> 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.
Electronics
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. semiconductor exports reached a record $15 billion in August 2025, an increase of nearly a third from 2024, contributing to total monthly exports of $58.4 billion.<ref>Template:Cite web</ref>
Automobile
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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.<ref>Template:Cite web</ref> 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.
Mining
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,<ref>Template:Cite web</ref> the 4th largest world producer of rhenium,<ref>Template:Cite web</ref> and the 10th largest world producer of sulfur.<ref>Template:Cite web</ref>
Construction
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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.<ref>Template:Cite web</ref> 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.<ref>Template:Cite book</ref><ref>Template:Cite web</ref>
Armaments
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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.<ref>Template:Cite web</ref>
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.<ref>Template:Cite web</ref> In other major outsourcing and joint-production deals, South Korea has jointly produced the S-300 air defence system of Russia via Samsung Group,Template:Failed verification and will facilitate the sales of Mistral class amphibious assault ships to Russia that will be produced by STX Corporation.<ref>Template:Cite news</ref> The deal was cancelled in 2014 due to Russia's actions in Ukraine and the ships were sold to Egypt instead.<ref> Template:Citation</ref> South Korea's defence exports were $1.03 billion in 2008 and $1.17 billion in 2009.<ref>Template:Cite news</ref>
Tourism
In 2012, 11.1 million foreign tourists visited South Korea, making it one of the most visited countries in the world,<ref>Template:Cite web</ref> up from 8.5 million in 2010.<ref>Template:Cite news</ref> 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.
Trade statistics
| Product | Percentage | Exports value |
|---|---|---|
| Integrated circuits | 17.7% | $116 (in billion) |
| Cars | 6.85% | $44.7 (in billion) |
| Refined petroleum | 5.57% | $36.4 (in billion) |
| Motor vehicle parts | 2.95% | $19.3 (in billion) |
| Office machine parts | 2.76% | $18 (in billion) |
| Passenger and cargo ships | 2.71% | $17.71 (in billion) |
| Telephones | 2.46% | $16.1 (in billion) |
| Machinery | 1.78% | $11.6 (in billion) |
| Blank audio media | 1.66% | $10.8 (in billion) |
| Others | 55.6% | $362.39 (in billion) |
| Product | Percentage | Imports value |
|---|---|---|
| Crude petroleum | 10.5% | $60.6 (in billion) |
| Integrated circuits | 8.21% | $41.4 (in billion) |
| Petroleum gas | 4.25% | $24.5 (in billion) |
| Refined petroleum | 4.2% | $24.3 (in billion) |
| Photo lab equipment | 2.88% | $16.6 (in billion) |
| Coal briquettes | 2.27% | $13.1 (in billion) |
| Cars | 2.09% | $12 (in billion) |
| Machinery | 1.37% | $7.9 (in billion) |
| Computers | 1.32% | $7.6 (in billion) |
| Others | 62.91% | $370 (in billion) |
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Mergers and acquisitions
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).<ref>Template:Cite news</ref>
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.Template:Citation needed
See also
- 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
References
Further reading
- Koh, Jae Myong (2018) Green Infrastructure Financing: Institutional Investors, PPPs and Bankable Projects, London: Palgrave Macmillan. Template:ISBN.
- Template:Cite book
- Template:Cite book
- Template:Cite book 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.
External links
- Statistics Korea
- Ministry of Economy and Finance (South Korea)
- Korea Customs Service
- Bank Of Korea Template:Webarchive
- World Bank Summary Trade Statistics South Korea
- South Korea – OECD
- South Korea profile at the CIA World Factbook
- South Korea profile at The World Bank
Template:Economy of South Korea Template:Navboxes Template:Authority control