The World Bank says exports make up nearly 14% of the US economy. For South Korea, the percentage is more than triple that figure - making the economy dependent on trade. HPR’s Bill Dorman recently returned from a reporting trip to South Korea with the East West Center and has more on the country’s economic picture in today’s Asia Minute.
25 years ago, South Korea and China did not have diplomatic relations. Today, China is Korea’s largest trade partner—by far. 26% of Korea’s exports go to China. Double the share that go to its second largest market - the United States. That reliance on a single market carries a risk - especially when China’s growth is slowing.
This month, a government-run think tank called the Korea Development Institute said a drop of one-percentage point in China’s growth would knock up to 6-tenths of one-percentage point off Korea’s GDP. Korea’s economy is also affected by the United States—where higher interest rates are widely expected. That may lead to an outflow of foreign direct investment from Korea - though the precise impact is a matter of debate. Jin Kyo Suh of the Korea Institute for International Economic Policy calls his country’s overall economic situation “challenging.”
Korea’s economy is growing—this week the government said it expects a little more than 3% growth this year with a similar performance next year. That view’s a bit more optimistic than think tanks and major banks as well as the country’s biggest companies. Last week, the Federation of Korean Industries found nearly 90% of the country’s biggest conglomerates believe growth will stay below 3% next year.
On the micro level, there are some troubling trends. Household incomes are at a six-year low - while this week, the government reported household debt is at its highest level and growing at its fastest pace since the Bank of Korea began compiling those figures in 2002.
