Changes

In recent years, Korea's economy moved away from the centrally planned, government-directed investment model toward a more market-oriented one. Korea bounced back from the 1997-98 Asian financial crisis with some International Monetary Fund (IMF) assistance, but based largely on extensive financial reforms that restored stability to markets. These economic reforms, pushed by President Kim Dae-jung, helped Korea maintain one of Asia's few expanding economies, with growth rates of 10% in 1999 and 9% in 2000. The slowing global economy and falling exports slowed growth to 3.3% in 2001, prompting consumer stimulus measures that led to 7.0% growth in 2002. Consumer over-shopping and rising household debt, along with external factors, slowed growth to near 3% again in 2003. Economic performance in 2004 improved to 4.6% due to an increase in exports, and remained at or above 4% in 2005, 2006, and 2007.  

In recent years, Korea's economy moved away from the centrally planned, government-directed investment model toward a more market-oriented one. Korea bounced back from the 1997-98 Asian financial crisis with some International Monetary Fund (IMF) assistance, but based largely on extensive financial reforms that restored stability to markets. These economic reforms, pushed by President Kim Dae-jung, helped Korea maintain one of Asia's few expanding economies, with growth rates of 10% in 1999 and 9% in 2000. The slowing global economy and falling exports slowed growth to 3.3% in 2001, prompting consumer stimulus measures that led to 7.0% growth in 2002. Consumer over-shopping and rising household debt, along with external factors, slowed growth to near 3% again in 2003. Economic performance in 2004 improved to 4.6% due to an increase in exports, and remained at or above 4% in 2005, 2006, and 2007.  

Economists are concerned that South Korea's economic growth potential has fallen because of a rapidly aging population and structural problems that are becoming increasingly apparent. Foremost among these structural concerns is the rigidity of South Korea's labor regulations, the need for more constructive relations between management and workers, the country's underdeveloped financial markets, and a general lack of regulatory transparency. Restructuring of Korean conglomerates ("chaebols") and creating a more liberalized economy with a mechanism for bankrupt firms to exit the market are also important unfinished reform tasks. Korean policy makers are increasingly worried about diversion of corporate investment to China and other lower wage countries.  

Economists are concerned that South Korea's economic growth potential has fallen because of a rapidly aging population and structural problems that are becoming increasingly apparent. Foremost among these structural concerns is the rigidity of South Korea's labor regulations, the need for more constructive relations between management and workers, the country's underdeveloped financial markets, and a general lack of regulatory transparency. Restructuring of Korean conglomerates ("chaebols") and creating a more liberalized economy with a mechanism for bankrupt firms to exit the market are also important unfinished reform tasks. Korean policy makers are increasingly worried about diversion of corporate investment to China and other lower wage countries.

 

 

*Nominal GDP: 2005, $787.5 billion; 2006 est., $897.4 billion.

*Nominal GDP: 2005, $787.5 billion; 2006 est., $897.4 billion.

*GDP growth rate: 2004, 4.7%; 2005, 4.0%; 2006 est. 5.0%; 2007 est. 4.8%.

*GDP growth rate: 2004, 4.7%; 2005, 4.0%; 2006 est. 5.0%; 2007 est. 4.8%.