South Korea flag South Korea: Economic and Political Overview

The economic context of South Korea

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Ranking 12th among the world's largest economic powers and 4th in Asia in 2023, South Korea is famous for its spectacular rise from one of the poorest countries in the world to a developed, high-income country in just one generation. During the global financial crisis of 2007-2008, the country maintained a stable economy and even experienced economic growth during the peak of the crisis. However, the South Korean economy went into its worst year growth period in more than half a century in 2020, battered by China's economic slowdown and uncertainties over the trade war between Beijing and Washington, and the global effects of the COVID-19 pandemic. Stagnant investment and the failure to spill the boom of chip sector over into other industries already limited economic growth to an estimated 2.2% in 2019, before declining to -0.9% in 2020 and bouncing back at 4.1% in 2021 and 2.6% in 2022. According to the IMF's October 2022 forecast, GDP growth is expected to reach 2% in 2023.

Thanks to stimulus packages, public finances remain stable in 2021 and 2022. The budget surplus decreased from 0.5% of GDP in 2019 to -1.5% in 2020 but came back to +0.5% of GDP in 2021 and -1.6% in 2022. The IMF expects the fiscal deficit will remain at +0.3% in 2023 and +0.4% in 2024. Public debt grew to an estimated 51.3% of GDP in 2021 and 54.1% in 2022 and is expected to rise in the coming years at 54.4% in 2023 and 55.2% in 2024 (IMF, October 2022). Inflation is projected to stand at 3.8% in 2023, compared to 5.5% in 2022 and 2.5% in 2021. Since 2020 the government has worked hard to boost the economy through expansionary fiscal spending, and as a result employment data showed an improvement in terms of both the number of jobs and employment status. Framework measures for industrial innovation have been completed, which cover the plans to restructure manufacturing and services, develop the new core industries of data, networks and AI, and promote the three new promising industries of a system on a chip, biohealth and future cars. The government also worked for a second venture boom, strong employment support and social safety nets, which led to improved distribution indicators, and supplementary measures to help the 52 hour workweek run smoothly. However, the private sector has not yet picked up, as well as the country's growth potential.

For 2022, South Korean exports increased 6.1% while imports rose 18.9%. Nevertheless,The trade shortfall was $4.7 billion in December, resulting in the first annual deficit since the global financial crisis as elevated oil prices battered many trade-dependent nations. South Korea’s exports continued to decline early in 2023 in a sign of cooling global demand as higher interest rates weigh on consumption (Bloomberg, 2023).

South Korea has experienced remarkable success in combining rapid economic growth with significant reductions in poverty. Income per capita increased from USD 100 in 1963 to more than USD 42 500 in 2022 (IMF, October 2022). Although the unemployment rate was estimated very low in 2022 at 3% (IMF, 2023) the number of irregular workers is very high, social inequalities are deepening and social ties are deteriorating. The government is struggling to turn employment around, even after using USD 400 million extra budget mainly for job-creation projects and is urging pension funds to invest more in small-cap Kosdaq stocks to boost innovation. In the medium and longer terms, South Korea will spend more on preparing measures to tackle the low birth rate, elderly poverty and low employment among women. The IMF expects however the unemployment rate to remain slightly affected by the negative economic impact of the COVID-19 pandemic, the rate being currently estimated to stay at 3.4% in 2023.

South Korea has recovered well from the pandemic, a testament to its strong economic fundamentals and appropriate policy responses. Economic output has surpassed pre-crisis levels despite multiple waves of infection. The effects of Russia’s invasion of Ukraine and related sanctions have exacerbated concerns about stagflation risks. Specifically, the increase in commodity prices, particularly of energy, has been fueling inflationary pressures even as the adverse impact of the war on trading partners and recent developments in China could significantly weigh on economic activity in Korea (IMF, 2023). In 2023, the country’s most immediate challenge will be to navigate the volatile international context, facing steep challenges against a backdrop of the persistent health and economic overhang of a global pandemic and a war in Europe, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China.

Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 1,673.921,709.231,784.811,873.341,957.35
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD) 32,41833,14734,65336,40738,077
General Government Balance (in % of GDP) -1.7-1.1-0.8-0.2-0.1
General Government Gross Debt (in % of GDP) 53.854.355.656.557.1
Inflation Rate (%) n/a3.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD) 29.8322.7630.5836.8048.89
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database, October 2021

Main Sectors of Industry

South Korea has experienced one of the largest economic transformations of the past 60 years. Given its limited geographical size, insufficient natural resources and population size (a labour force of 28.4 million people out of its 51.28 million population), the country has devoted special attention to technology development and innovation to promote growth, growing from a predominantly rural, agricultural nation into an urban, industrialized country. Industry represented 32.4% of the GDP and employed 25% of the workforce in 2022 (World Bank, 2023). The main industries include textile, steel, car manufacturing, shipbuilding and electronics. South Korea is the world's largest producer of semiconductors.

The agricultural sector in South Korea only makes a negligible contribution to the country's GDP (1.8%) and employed only 4.8% of the active population in 2021 (World Bank, 2023). Rice is the main agricultural crop; barley, wheat, corn, soybeans and sorghum are extensively cultivated. The sector also includes large-scale livestock farming. Less than one-fourth of the land is cultivated. South Korea's mineral resources are limited to gold and silver.

The service sector is the largest and fastest economic sector, accounting for 57% of GDP and employing 70.2% of the active population (World Bank, 2023), especially department stores, store chains and supermarkets. Tourism was one of the fast-growing sectors, with a rise of 14% in 2019 according to Korean Tourism Organization, although the number of Chinese tourists dropped drastically in the last years because of Beijing's travel ban, which has not been fully lifted. Since 2020 the country is waiting for the world's borders to open again to international travel.

Global economic activity is experiencing a broad-based and sharper-than-expected slowdown, with inflation higher than seen in several decades. The cost-of-living crisis, tightening financial conditions in most regions, Russia’s invasion of Ukraine, and the lingering COVID-19 pandemic all weigh heavily on the outlook.  Global growth is forecast to slow from 6.0 percent in 2021 to 3.2 percent in 2022 and 2.7 percent in 2023, the weakest growth profile since 2001 except for the global financial crisis and the acute phase of the COVID-19 pandemic. Global inflation is forecast to rise from 4.7 percent in 2021 to 8.8 percent in 2022 but to decline to 6.5 percent in 2023 and to 4.1 percent by 2024 (International Monetary Fund - IMF, 2023). The impact of the 2022 world events appears to have affected both sides of most sectors and markets in this country for the third year in a row - demand disruptions having run up against supply problems - making the short-term outlook uncertain for agriculture, industry and service sectors.

Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 5.3 24.6 70.0
Value Added (in % of GDP) 1.6 31.8 58.2
Value Added (Annual % Change) -1.3 1.2 4.2

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.


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Indicator of Economic Freedom


The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

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Business environment ranking


The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

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Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025


Country Risk

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Sources of General Economic Information

Ministry of Trade, Industry and Energy
Korea Communications Commission (KCC)
Ministry of Foreign Affairs
Ministry of Environment (MOE)
Ministry of Health and Welfare (MOHW)
Ministry of Agriculture, Food and Rural Affairs
Statistical Office
Korea National Statistical Office
Korean Statistical Information Service
Central Bank
Bank of Korea (BOK)
Stock Exchange
Korea Exchange
Economic Portals
Korean Culture and Information Service (KOCIS)

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Latest Update: November 2023