It is predicted that Korea’s per-capita GNI will exceed US$24,000 this year for the first time in its history, 18 years after the US$10,000 mark was surpassed. However, not a few experts are saying that the growth has little to do with people’s living standards and earnings equality, because it can be mainly attributed to a drop in the foreign exchange rate.
The per-capita GNI is forecast to amount to US$24,044 this year. It topped US$10,000 in 1995 to reach US$11,735 and exceeded US$20,000 in 2007, when the amount added up to US$21,632. However, the per-capita GNI dipped below US$20,000 in 2008 and 2009 due to the global financial crisis before regaining the US$20,000 mark in 2010.
Under the circumstances, much attention is being paid to when Korea will be able to reach a per-capita GNI of US$30,000 and US$40,000. As of last year, only nine countries with over 10 million population recorded a per-capita GNI of US$40,000 or more, including the United States, Japan, Germany, France, Canada, and Australia. They took an average of 9.6 years and 5.6 years to get to US$30,000 from US$20,000 and to US$40,000 from US$30,000. Economists are forecasting that Korea will be joining them between 2016 and 2017, or in 2020 or later depending on the economic situation.
“If the potential economic growth rate remains over 4% by dint of productivity enhancement, economic structural advancement, and a balance between domestic consumption and export, the figure is likely to exceed US$30,000 in 2017,” said Kim Dong-ryeol, senior research analyst at Hyundai Research Institute. He added that the aging of the population and the low total fertility rate of 1.2 could affect income growth.
In the meantime, it has been pointed out that the record-high per-capita GNI is not leading at all to any improvement in living standards since the income growth is based on the drop in the won-dollar rate. The exchange rate fell from 1,102 won to 1,095 won between 2012 and the first 10 months of this year, which has resulted in the increase in the dollar-based GNI.
“Of the per-capita GNI growth for this year, the GDP effect and foreign exchange effect account for 3.3% and 2.9%, respectively,” LG Economic Research Institute researcher Lee Keun-tae explained.