Korea Economic Outlook
Asian dynamo:
South Korea, officially the Republic of Korea, stands as a beacon of economic success in Asia. With a GDP of USD 1.8 trillion, it stands as the fourth largest economy in the region, only trailing much more populous neighbors China, Japan and India. South Korea has transformed itself from a war-torn country to among the world's richest and most advanced nations in only a few decades. This growth can be attributed to a combination of factors, including export-oriented policies, government-led industrialization strategies, and sustained investments in education and technology.
High-tech hub:Today, South Korea is one of the world's main producers of electronics, semiconductors, and automobiles, and many of the company's firms are household names. Together with Taiwan's TSMC, Korea's Samsung produces the globe's most advanced chips, which are in increasing demand in an era of ever-rising digitalization. The Korean car firms Hyundai and Kia export automobiles around the world, while LG holds a large slice of the electronics market.
Export-oriented economy:South Korea's economy is heavily dependent on international trade, with exports accounting for close to half of GDP. This makes the economy vulnerable to volatility in external demand and global trade flows. China and the U.S. are the country's major trade partners.
Challenges:Society is aging rapidly, the fertility rate is currently the lowest in the world, and the population is declining. All three factors are weighing on private spending and putting pressure on fiscal resources, and they will do so increasingly in the coming years. Moreover, tensions with North Korea are a risk, as is a regional military conflict between China and the U.S.—most likely over the status of Taiwan. Elevated household debt is another factor to watch, as it could pose risks to financial stability. The country faces the need to reduce economic inequality and encourage greater competition in the economy. Finally, Chinese manufacturers could trim Korea's market share in global markets for cars, chips and electronics.
South Korea's economic outlook:Growth in the coming years will be above that experienced in most other advanced economies, aided by South Korea's privileged position at the forefront of several high-tech industries and surrounded by dynamic, fast-growing Asian economies. However, unfavorable demographics will exert an increasing drag on activity.
Korea's Macroeconomic Analysis:
Nominal GDP of USD 1,838 billion in 2023.
GDP per capita of USD 35,538 compared to the global average of USD 10,589.
Average real GDP growth of 2.6% over the last decade.
Sector Analysis
In 2022, services accounted for 58% of overall GDP, manufacturing 24%, other industrial activity 16%, and agriculture 2%. Looking at GDP by expenditure, private consumption accounted for 49% of GDP in 2023, government consumption 19%, fixed investment 32%, and net exports 0%.International trade
In 2020, manufactured products made up 85% of total merchandise exports, mineral fuels 9%, food 1%, ores and metals 3% and agricultural raw materials 1%, with other categories accounting for 1% of the total. In the same period, manufactured products made up 56% of total merchandise imports, mineral fuels 30%, food 6%, ores and metals 7% and agricultural raw materials 1%, with other goods accounting for 0% of the total. Total exports were worth USD 684 billion in 2024, while total imports were USD 632 billion.Main Economic Indicators
Economic growthThe economy recorded average annual growth of 2.6% in the decade to 2024. The COVID-19 pandemic led to a temporary setback in 2020, but a swift recovery followed, underpinned by strong technology sectors and effective pandemic management. South Korea's growth trajectory reflected its successful transition to a high-value, innovation-driven economy. To read more about GDP growth in Korea, go to our dedicated page.
Fiscal policy
Korea's fiscal deficit averaged 0.4% of GDP in the decade to 2023. However, the COVID-19 pandemic led to increased fiscal spending to support the economy, resulting in a larger deficit. By 2022, as the economy recovered, the government began focusing on fiscal normalization, aiming to balance economic support measures with the longer-term goal of fiscal sustainability. Find out more on our dedicated page.
Unemployment
The unemployment rate averaged 3.5% in the decade to 2024. The COVID-19 pandemic caused a brief increase in unemployment, but South Korea's effective response and economic recovery measures led to a quick rebound. By 2022, the unemployment rate was back to below pre-pandemic levels, demonstrating the strength of South Korea's job market. For more information on Korea's unemployment click here.
Inflation
Inflation averaged 1.9% in the decade to 2024. Inflation was notably below this threshold in the years before the COVID-19 pandemic, and surged in 2021 and 2022 on economic recovery, supply constraints and high commodity prices. That said, inflation in 2022 was still below the OECD average. Inflation came down in 2023 thanks to successive rate hikes by the Central Bank. Go to our Korea inflation page for extra insight.
Monetary Policy
Korea's monetary policy rate ended 2024 at 3.00%, up from 2.00% a decade earlier. Post-pandemic, there was a gradual shift towards higher interest rates in order to tame above-target price pressures. See our Korea monetary policy page for additional details.
Exchange Rate
The South Korean won experienced periods of depreciation over the last decade, particularly during times of global economic uncertainty, but also saw phases of appreciation, reflecting South Korea's robust export sector and the government's sound economic management. The currency depreciated overall against the U.S. dollar in the decade to 2023, reflecting relatively more aggressive monetary tightening by the U.S. Federal Reserve. For more info on the won, click here.
Economic situation in Korea
The economy expanded a mere 0.1% quarter on quarter in Q4, below market expectations and weak by historical standards. Readings for private consumption and fixed investment softened compared to Q3, amid economic uncertainty stemming from U.S. tariff threats and President Yoon Suk Yeol’s brief martial law declaration. Our Consensus is for GDP growth to be picking up in Q1, but available data suggests downside risks to this forecast. In January, economic activity contracted at the fastest pace since 2020. While part of the fall can be attributed to the early timing of the Lunar New Year, retail and services activity—which might have been expected to benefit from the festivity—also declined. Moreover, exports fell on average in January–February from the same period in 2024, while business and consumer confidence averaged below Q4 levels in January–March and January–February respectively.Korea Economic Forecasts
Projections out to 2034.49 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 31 expert analysts.
Want to get insight on the economic outlook for Korea in the coming years? FocusEconomics collects projections out to 2034 on 49 economic indicators for Korea from a panel of 31 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Korea economy. To download a sample report on the Korea's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Korea Economic Indicators
Q&A:
What kind of economy does South Korea have?
Why is South Korea's economy so strong?
What is the trend in the economy of South Korea?
South Korea has a mixed economy, characterized by a combination of free-market and government intervention. It's heavily reliant on international trade and is known for its major conglomerates like Samsung and Hyundai. The economy is also supported by robust technology, automobile, shipbuilding, and consumer electronics industries.
South Korea's economy is strong due to its focus on high-tech industries, extensive education system, significant investment in research and development, and a highly skilled workforce. Additionally, the presence of global conglomerates like Samsung and Hyundai and a strong export sector contribute to its economic strength.
The South Korean economy is expected to slow down in 2023 due to global headwinds such as rising interest rates, supply chain disruptions, and the war in Ukraine. However, the economy is still projected to grow; the government is implementing measures to support growth, such as fiscal stimulus and infrastructure investments.