South Korea’s GNI per capita showed the steepest decline in a decade last year. Besides, South Korea’s nominal GDP growth hit a 10-year low of 1.1 percent. This means the South Korean government’s income-led growth policy based on an increase in minimum wage is not working well.
The Bank of Korea announced on March 3 that the GNI per capita fell 4.1 percent from US$33,434 in 2018 to US$32,047 in 2019. With the nominal GDP growth remaining below the real GDP growth, the value of the South Korean currency vis-à-vis the U.S. dollar fell 5.9 percent to cause a decline in South Korea’s U.S. dollar-denominated income. For reference, the GNI per capita dropped 10.4 percent during the global financial crisis in 2009 and the most recent decline was in 2015, when it fell 1.9 percent.
Last year, South Korea’s nominal GDP growth and GNI per capita were adversely affected by recessions in the manufacturing and service sectors. Especially, semiconductor prices plunged more than 50 percent to drop the profitability of South Korean manufacturers while the prices of imported goods showed no significant decline.
In 2019, South Korea’s construction and facility investments fell 3.1 percent and 7.7 percent year on year, respectively. On the other hand, its private consumption edged up 1.9 percent. The investment and consumption in the private sector lost steam and government expenditures were insufficient to offset the decline.