Growth Stagnation
The Korean economy has been showing stagnation in growth for 17 years since the Asian financial crisis in 1997, lagging behind in the fierce competition with other countries. Korea ranked 11th in GDP in 1997, but slid to 15th in 2008, and has remained there since.
This is why economists point out that Korea has to face up to the reality that it has fallen behind the BRICs countries for a long time. “We have focused only on our early escape from the global financial crisis and robust economic fundamentals,” said an official at the Federation of Korean Industries, adding, “However, the cold truth is that we have been long overtaken as seen in the GDP ranking, and even leading players such as Samsung Electronics and Hyundai Motor Company, which recently shocked investors with their Q2 performances, are likely to have a harder time down the road.”
Korea has been at a standstill for the 17 years when it comes to the number of Fortune Global 500 companies, too. During the period, China boosted their number from five to 95, India from one to eight, and Russia from one to eight as well. But the number of Korean Fortune Global 500 companies edged up slightly from 13 to 17.
The size of foreign direct investment (FDI) in Korea has doubled in 17 years, but Korean companies’ investment abroad has increased six-fold. In other words, its efforts for foreign investment attraction have not paid off. The former increased from US$6.9 billion to US$14.5 billion between 1997 and 2013, while the latter went up from US$6.1 billion to US$35.1 billion.
Crisis factors in sight include the sluggish domestic demand in the wake of the Sewol ferry disaster, delay in the recovery of the global economy, unstable foreign exchange conditions, and Chinese companies’ offensives. Increasing household debt and financial difficulties affecting vulnerable sectors can be added to the list, too. Experts, however, are mentioning that many people are overlooking the fact that the national economy is mired in a structural slump shrouded by short-term, fragmentary issues.
“As the recent business figures show, the Korean economy is heading toward structural and permanent slow growth,” one of them explained, adding, “We are in need of a groundbreaking policy that can change the whole shape of the national economy.”