Subchapters:
- Basic data
- Public finances and the state budget
- Banking system
- Tax system
Basic data
| Pointer | 2019 | 2020 | 2021 | 2022 | 2023 |
| GDP growth (%) | 2 | -0.9 | 4.0 | 3.1 | 2.5 |
| GDP/population (USD/PPP) | 33,433.00 | 31,881.00 | 35,168.00 | 52,660.00 | 55,300.0 |
| Inflation (%) | 0.4 | 0.5 | 2.1 | 2.3 | 1.2 |
| Unemployment (%) | 3.8 | 4.0 | 3.7 | 3.1 | 3.0 |
| Export of goods (billion USD) | 542.4 | 512.9 | 644.5 | 667.1 | 652.8 |
| Import of goods (billion USD) | 503.2 | 467.2 | 615.1 | 670.2 | 653.1 |
| Trade Balance (Billion USD) | 39.2 | 45.7 | 29.4 | 48.4 | 49.9 |
| Industrial production (% change) | -0.5 | 0.3 | 7.4 | 3.1 | 2.9 |
| Population (millions) | 51.2 | 51.3 | 51.7 | 51.3 | 51.3 |
| Competitiveness | 28/63 | 23/63 | 23/64 | ON | ON |
| OECD export risk | ON | ON | ON | ON | ON |
Source: EIU, OECD, IMD, Ministry of Economy and Finance Korea, FitchRatings
In 2021, Korea’s economy picked up its pre-pandemic growth rate and posted the fastest annual growth among G20 advanced nations, supported by buoyant exports, which hit the fastest pace in 2021, and a steadily recovering labor market.
Thanks to policies aimed at addressing income inequality, there has been an improvement in household incomes.
According to cheeroutdoor.com, the country’s economy has also taken a step towards a progressive future thanks to the strengthening of the integration of new “DNA” (Data, Network, AI) and BIG3″ (Chips, Biohealth, Future Cars) technologies, as well as in business support.
The economy is also seeing steady improvement on long-term challenges such as carbon neutrality and local depopulation. The number of hydrogen fuel cell vehicles has grown to the largest in the world, and the future reduction of carbon emissions is rated as the second highest among Asian countries.
GDP per capita rose to $35,168 in 2021, surpassing the $35,000 mark four years after reaching $30,000 in 2017. GDP per capita made the biggest improvement of 10.3% since 2010 thanks to GDP growth at current prices of 6.4% and a stable exchange rate of 3.0%.
Exports of goods and services from South Korea accounted for 36.5% of the country’s GDP.
Korea’s foreign trade in 2021 was US$1,259.6 billion. Exports in 2021 reached $64billion, an increase of 25.8% over 2020. Imports reached $61billion, an increase of 31.5%.
As a net exporter for the 13th consecutive year with a trade surplus of US$29.5 billion, Korea ranks among the top 8 trading countries in the world.
In an indicator of Korea’s more balanced growth, 15 major items saw overall positive export growth for the first time in the 21st century, with all posting double-digit jumps. Exports were dominated by semiconductors (↑29.0%), petrochemical products (↑54.8%), followed by biomedical products (↑16.9%) and electric batteries (↑15.5%).
Factors that contributed to record high exports of semiconductors and computers were the pandemic-induced expansion of the contactless economy and a revived digitalization transition.
A global increase in demand for high-value-added and eco-friendly products led to Korea’s 4th-highest auto exports in history, despite problems in the automotive semiconductor supply chain. In addition, Korea’s competitive advantage in shipbuilding has helped Korea recover its pre-pandemic export levels.
With the recent resurgence of the so-called “K-wave”, relatively newer items such as cosmetics (↑21.5%) and agricultural products (↑13.2%) were among those whose exports recorded the first-ever US$10 and US$9 billion in the order given in the text.
South Korea’s largest export partner remained China, which accounted for 25.3% of total exports, ahead of the USA (14.9%), the EU (9.9%), Vietnam (8.8%), Hong Kong (5.8%) ) and Japan (4.7%). South Korean imports also jumped 31.5% to $61billion in 2021. The main sources of imports to South Korea were China (22.5%), the US (11.9%), the EU (10.7%) and Japan (8.9%).
Key export industries will mostly grow in 2022 as well, but more slowly than last year. Economist. uncertainty persists thanks to the pandemic and the slowdown in the economy. growth of the PRC. Strategic industries—semiconductors and batteries—face business continuity disruptions in global supply chains if raw materials used for production are held “hostage” in the US/PRC dispute.
In global green campaigns, opportunities for the battery, automotive and shipbuilding industries are increased demand for electricity. vehicles and ships powered by LNG and LPG. Green campaigns are pressuring steel mills to reduce CO2 emissions, even though it is very energy intensive. Smartphones and ICT equipment are among the industries that are unlikely to be disrupted by global challenges. The demand for these segments arises as a result of growing trends in remote work and orientation towards digital technologies. This also applies to the pharmaceutical/healthcare industry.
In the services sector, growth in the travel, air transport, leisure and dining sectors will depend on handling the pandemic. In terms of CO2 reduction targets, battery manufacturers are expected to benefit from rapid sales of electric vehicles powered by Li-ion batteries.
Public finance and state budget
| Public finance | 2021 |
| State budget balance (% of GDP) | -3.1 |
| Public debt (% of GDP) | 48.0 |
| Current account balance (billion USD) | 91.0 |
| Taxes | 2022 |
| AFTER | 25% |
| F.O | 6-38% |
| VAT | 10% |
On 21 February 2022, the first supplementary budget for 2022 worth US$1billion was approved in the National Assembly. An additional $billion in adjustments have been made to the government’s $1 billion proposal, which includes $1.67 billion to support small businesses and blind spots and $0.7 billion to support measures for disease control. Reserve funds were reduced to $0.5 billion from the original $0.83 billion.
Amendments made in the National Assembly
– Loss compensation for small business owners (up to $1.08 billion)
– Financial support for vulnerable groups and other blind spots (up by $0.58 billion)
– Support for the transition from quarantine to home treatment (up by USD 1.08 billion)
Korea’s external debt stood at US$628.5 billion at the end of the year, up US$8billion from a year ago. Of which short-term debt was USD 16billion and long-term debt was USD 46billion.
The increase in short-term external debt ($billion) was the lowest level since 2016. This was due to the expansion of private business credit due to the economic recovery and improved business conditions after the pandemic.
Korea’s foreign exchange reserves at the end of December 2021 amounted to USD 46billion. Korea’s official foreign exchange reserves consisted of securities worth $42billion (91.1%), deposits of $1billion (3.6%), special drawing rights of $1billion ( 3.3%), gold at USD billion (1.0%) and the country’s IMF position at USD billion (1.0%).
Banking system
The central bank of KR is the Central Bank of Korea. Its main role is the management of monetary and foreign exchange policy. In the field of control and supervision of the financial and capital market, BOK cooperates with the Financial Supervisory Commission and the Financial Supervisory Service.
There are 8 main commercial banks operating in KR (Kookmin Bank, then Woori Bank, Hana Bank, Shinhan Bank, Chohung Bank, Korea Exchange Bank, Citibank and Korea First Bank). In addition, 6 regional banks operate in the cities of Daegu, Busan, Gwangju, Jeju, Jeonbuk and Gyongnam.
Korean specialized banks:
– The Korea Development Bank (long-term loans for industrial development)
– The Export-Import Bank of Korea (financing of medium and long-term loans with foreign entities)
– The Industrial Bank of Korea (lending to SMEs)
– The National Agricultural Cooperative Federation (support for effective implementation of agricultural programs)
– The National Federation of Fisheries Cooperatives (assistance to fishermen and fish processors)
In KR, insurance companies are divided into insurance companies providing life insurance (Life Insurance Companies) and other insurance companies (Non-life Insurance Companies). There are 25 entities providing life insurance on the market, of which 16 are domestic (Samsung, Hanwa and Kyobo, etc.) and 9 are foreign (e.g. ING, Prudential, AIA). Insurance companies that do not provide life insurance can be divided into general and specialized. General insurance companies offer insurance products such as car insurance, fire insurance or marine insurance. There are 20 insurance entities of this type in KR, of which 5 are foreign (e.g. Meritz, AIG and AXA).
Among the most important are the government insurance companies National Health Insurance and National Pension Service. Furthermore, Korea Trade Insurance Corporation and Korea Deposit Insurance Corporation, which are only partly owned by the state. Among the most important private specialized insurance companies are Seoul Guarantee Insurance Company, Korean RE and foreign Munich Re.
Tax system
The Korean tax system consists of national (state) and local taxes. State taxes are divided into internal (direct and indirect), customs and special taxes. Local taxes are divided into provincial, regional and municipal. The National Tax Collection Service (NTS) is responsible for collecting taxes in the Republic of Korea.
Korea has tax treaties with more than 90 countries. From September 2020, the Multilateral Convention on the Implementation of Measures to Combat Base Reduction and Profit Shifting in Relation to Tax Treaties (Multilateral Instrument – MLI) also entered into force for Korea, which regulates double taxation avoidance issues.
The most important national taxes
· Personal income tax (6 – 45%)
· Corporate income tax (10 – 25%)
· Value added tax (VAT, 10%)
· Capital gains tax for FO and PO
· Environmental tax, and transport and energy
taxes · Real estate
tax · Inheritance tax
Customs duty
Main local taxes:
· Acquisition tax
· Registration and license tax
· Leisure tax
· Tobacco consumption tax
· Local consumption tax
· Resident tax
· Local income tax
· Property tax
· Automobiles tax
· Regional resources facilities tax
· Local educational tax
More information about the tax system Republic of Korea can be found on the website: www.nta.go.kr and National Tax Service, www.nts.go.kr
Source: Ministry of Finance of the Republic of Korea, Central Bank of Korea, Customs Administration of the Republic of Korea
