Out of Top 10
South Korea’s nominal gross domestic product (GDP) is provisionally ranked 13th in the world. It has dropped out of the global top 10.
According to statistics released by the Bank of Korea (BOK) on July 12, South Korea’s nominal GDP at market exchange rates was US$1.6732 trillion in 2022. It ranked 13th globally.
The United States topped the list with US$25.462 trillion, followed by China with US$17.876 trillion. The so-called “G2 System” was proved by these rankings. Third place was taken by Japan with US$4.2256 trillion. Germany posted US$4.0752 trillion, the United Kingdom US$3.0798 trillion, India US$3.0096 trillion, France US$2.7791 trillion, Canada US$2.1436 trillion, Russia US$2.0503 trillion, and Italy US$2.0105 trillion. Italy came in 10th.
Brazil placed 11th with US$1.8746 trillion and Australia 12th with US$1.0723 trillion. South Korea claimed 13th place. South Korea’s GDP per capita was US$32,409.
If South Korea’s economy was scaled to 100 in 2022, the United States reached 1,522, more than 15 times the size of South Korea. China reached 1,068, Japan 253, and Germany 244. India’s economy was about 80 percent larger than South Korea’s.
South Korea’s economy joined the top 10 club in the world for the first time in 2005. It stayed outside the top 10 for a while, then moved back into it in 2018. It slid to 12th place in 2019, but then returned to 10th place for two consecutive years in 2020 and 21.
South Korea’s economic decline was mainly blamed on the depreciation of the Korean won. It has fallen more than any other country in terms of nominal GDP due to its relatively large depreciation against the U.S. dollar. South Korea’s nominal GDP in 2022 was 2,161.7739 trillion won. This represented a 3.9 percent increase from the previous year. However, in dollar terms, it was down 7.9 percent year over year.
This is largely due to recent fluctuations in commodity prices, which resulted in relatively larger increases in the sizes of the economies of commodity exporters such as Russia, Brazil, and Australia.
Most of all, South Korea’s economy has recently been performing below its potential growth rate. The Bank of Korea (BOK) and the Korean Ministry of Strategy and Finance have presented a forecast of 1.4 percent real GDP growth this year. This is well below 2 percent potential growth.
It will take a long time for South Korea’s economy to enter the top 10 again, experts forecast. This is because the globalization era, which has been the major driver of South Korea’s long-term growth, has been disrupted by the U.S.-China hegemonic war, and in the short term, a strong U.S. dollar is likely to continue for quite some time. The world’s major financial institutions have lowered their growth forecasts on South Korea for 2024 below that of other advanced economies.
When comparing Korea with other countries in national competitiveness, Korea has a gloomy outlook. Statistics Korea predicts that Korea’s population of 52 million in 2023 will plummet to 40 million in 2041 and then drop to 38 million, two-thirds of the current level, in 2070.
In terms of labor competitiveness, South Korea ranks low. According to the Heritage Foundation’s 2023 Index of Economic Freedom, Korea’s labor market index was 56.2, far behind the United States (76.3) and Japan (66.8). The index is a comprehensive measure of labor market regulations such as working hours, hiring, and firing.
Soaring minimum wage increases are one of the factors that further weaken Korea’s labor competitiveness. According to the Korea Enterprises Federation (KEF), the minimum wage in Korea swelled by 41.6 percent in the last five years (2018-2022), which is 1.3 to 5.6 times higher than those of the Group of Seven (G7) countries. Various regulations, frequent labor strikes, and labor cost burdens are considered factors that dampen foreign investment in Korea.
In terms of technological innovation, South Korea ranks in the middle of countries around the world. According to the International Innovation Scorecard released by the U.S. Consumer Technology Association (CTA) in early 2023, South Korea came in 26th among 70 countries in innovation.
However, South Korea’s rankings are subject to change, as the report is not based on official U.N. statistics. The BOK explained that it used forecasts by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD) as well as the United States, Japan, China, Germany, the United Kingdom, India, France, Italy, and Australia, so specific figures such as South Korea’s nominal GDP sizes and rankings are subject to change. The U.N.’s official statistics will be released in January 2024.