Report: South Korean Underground Economy Larger than OECD Average

According to the National Assembly Research Service’s data submitted on Oct. 12 to Minjoo Party of Korea lawmaker Lee Eon-ju, Austrian professor Friedrich Schneider estimated the ratio of the South Korean underground economy to its economy as a whole for the year of 2010 at 24.7 percent of its GDP. OECD member countries’ average was 17.9 percent that year.

The actual size of the South Korean underground economy was calculated based on the estimate amounts to 290 trillion won (US$261 billion) a year in that South Korea’s GDP totaled 1.173 quadrillion won (US$1.055 trillion) in 2010.

In the meantime, the Hyundai Research Institute recently estimated the ratio and the size at 23 percent and 290 trillion won (US$261 billion) for the year of 2012 as well, while the Korea development Institute, the Credit Finance Association and the Korea Institute of Public Finance mentioned 22 percent, 19.2 percent and 17.1 percent, respectively. For reference, the ratio is around 10 percent in advanced economies in general.

The lawmaker pointed out that the South Korean government’s plan to expose the underground economy is not working well. The government is planning to expose portions of the underground economy worth a total of 27.2 trillion won (US$24.8 billion) between 2013 and 2017.