Economic and political outline South Korea (2024)

Economic Outline

Economic Overview

South Korea, a developed economy renowned for its dynamic export sector, has weathered various economic challenges while maintaining its growth trajectory. In 2023, GDP growth moderated to 1.4%, down from 2.6% in 2022, primarily due to factors such as elevated interest rates and energy prices, which dampened private consumption and investment. Despite these obstacles, the semiconductor sector showed signs of recovery, hinting at a potential economic resurgence. Projections indicate a rebound in growth to 2.3% in 2024 and 2.1% in 2025, driven by renewed export and investment activities, especially in semiconductors. These figures underscore South Korea's ability to adapt and thrive amid changing global economic landscapes.

In fiscal terms, South Korea witnessed a narrowing fiscal deficit in 2023, with the consolidated deficit decreasing to 1.1% of GDP, influenced by expenditure reductions. However, revenue collection faced challenges, with a 10.1% drop in the year to August, attributed to weak corporate performance, particularly in the semiconductor sector, and declining property capital gains tax. To address a revenue shortfall of KRW 59.1 trillion (2.6% of GDP) in 2023, the government utilized public funds, including KRW 20 trillion from the FX stabilization fund, to bridge the gap rather than resorting to additional deficit financing. The forecasted consolidated deficit for 2024 stands at 0.8% in line with the government's budget proposal, although revenue performance remains weak. Despite restrained spending growth of 2.8% relative to the 2023 budget, fiscal deficits are expected to persist, signalling the government's commitment to fiscal prudence amid revenue challenges. Looking ahead, the administration aims for modest medium-term deficits, anticipating a decrease to 0.2% of GDP in 2025. Nevertheless, the debt-to-GDP ratio - at 54.3% last year - is projected to marginally rise to 56.5% by 2025. Inflation in 2023 moderated considerably, dropping to 3.4%, with further decline anticipated to 2.3% in 2024, reflecting gradual stabilization and adjustment in the economy. Monetary policy is expected to maintain stability, as indicated by the Bank of Korea's policy rate at 3.5% since January 2023. Household borrowing trends remain concerning, despite a slight decline to 101.7% of GDP in 2Q23 from its peak in 2Q22, raising the potential for increased debt burdens. Nevertheless, financial sector risks appear manageable, with banks well-positioned to navigate potential pressures, supported by strong underwriting standards and macroprudential measures.

South Korea has experienced remarkable success in combining rapid economic growth with significant reductions in poverty. Income per capita increased from USD 100 in 1963 to more than USD 56,709 in 2023 (IMF). Unemployment rates in South Korea have shown remarkable resilience, remaining historically low at 2.7% in 2023, despite weakened demand and occasional shocks. Labour market conditions have demonstrated relative stability, supported by the country's diversified economic structure and strong export-oriented industries. Looking ahead, unemployment rates are projected to increase slightly to 3.2% in 2024 and 3.3% in 2025, reflecting potential challenges in sustaining job creation amid evolving economic conditions. However, despite these projections, South Korea's labour market remains robust, indicating a steady employment environment amidst ongoing economic changes. In the medium and longer terms, however, South Korea will spend more on preparing measures to tackle the low birth rate, elderly poverty and low employment among women.

Main Indicators20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD)1,673.921,709.231,784.811,873.341,957.35
GDP (Constant Prices, Annual % Change)
GDP per Capita (USD)32,41833,14734,65336,40738,077
General Government Balance (in % of GDP)-1.7-1.1-0.8-0.2-0.1
General Government Gross Debt (in % of GDP)53.854.355.656.557.1
Inflation Rate (%)n/a3.
Unemployment Rate (% of the Labour Force)
Current Account (billions USD)29.8322.7630.5836.8048.89
Current Account (in % of GDP)

Source: IMF – World Economic Outlook Database, Latest data available.

Note : (E) Estimated data

Main Sectors of Industry

South Korea has experienced one of the largest economic transformations of the past 60 years. Given its limited geographical size, insufficient natural resources and population size (a labour force of 29.2 million people out of its 51.74 million population), the country has devoted special attention to technology development and innovation to promote growth, growing from a predominantly rural, agricultural nation into an urban, industrialized country. Industry represents 31.7% of the GDP and employs 25% of the workforce (World Bank, latest data available). Once characterized by resource scarcity, South Korea has emerged as a global leader in various industries, thanks to strategic government policies, heavy investments in research and development, and a skilled workforce. The main industries include textile, steel (with POSCO being the world's seventh-largest steelmaker), car manufacturing, shipbuilding and electronics (South Korea is the world's second-largest producer of semiconductors, which represents its main export). In 2023, the seasonally-adjusted production index across all industries, excluding agriculture, livestock, and fishery sectors, increased by 0.7% compared to the previous year, as per Statistics Korea. While industrial output continued to rise for the third consecutive year, the manufacturing sector experienced its most significant decline since 1998, amidst the fallout of the foreign exchange crisis in Asia. Manufacturing output plummeted by 3.9% last year, primarily due to a sharp decline in semiconductor production, marking the first downturn in 22 years since 2001. Manufacturers reported an average capacity ratio of 71.3% in 2023, reflecting a decrease of 3.5%age points from the previous year.

The agricultural sector in South Korea only makes a negligible contribution to the country's GDP (1.6%) and employs only 5% of the active population (World Bank). Rice is the main agricultural crop; barley, wheat, corn, soybeans and sorghum are extensively cultivated. The sector also includes large-scale livestock farming. Less than one-fourth of the land is cultivated. South Korea's mineral resources are limited to gold and silver. Statistics Korea (KOSTAT) issued its final assessment of 2023 rice production, indicating a total of 3.7 million metric tons, marking a 1.6% decrease compared to the previous year.

The service sector is the largest and fastest economic sector, accounting for 57% of GDP and employing 70.2% of the active population (World Bank), especially department stores, store chains and supermarkets. Tourism is one of the leading sectors: from January to November 2023, South Korea welcomed a total of 9,995,000 visitors, reflecting an impressive surge of 275.9% compared to the corresponding period in the previous year. However, despite the rebound, the number of visitors only reached 62% of the levels observed during the same timeframe in 2019 (data Korea Tourism Organization ). Overall output in the services industry went up 2.9% in 2023 after advancing 5% in 2021 and 6.7% in 2022 (data Statistics Korea).

Breakdown of Economic Activity By SectorAgricultureIndustryServices
Employment By Sector (in % of Total Employment)5.324.670.0
Value Added (in % of GDP)1.631.858.2
Value Added (Annual % Change)-

Source: World Bank, Latest data available.

Find more information about your business sector on our service Market Reports.

Indicator of Economic Freedom



The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

World Rank:
Regional Rank:

Economic and political outline South Korea (1)

Business environment ranking



The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

World Rank:

Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025

Country Risk

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Latest Update: March 2024

Economic and political outline South Korea (2024)


What is the political and economic system of South Korea? ›

South Korea has a mixed economic system which includes a variety of private freedom, combined with centralized economic planning and government regulation.

Who answers the 3 economic questions in North Korea? ›

In a command economy, the economy is centrally planned and coordinated by the government, making it a standard component of any communist country. The government of North Korea determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale.

What are South Korea's economic issues? ›

Weakening domestic demand from higher inflation was also a factor in South Korea's slowing economy. While inflation has been declining in South Korea, interest rates remain high and have dampened private consumption and investment. The Bank of Korea is not expected to cut rates until the second half of 2024.

What is the best way to describe the South Korean economy? ›

The economy of South Korea is a highly developed mixed economy.

What politics is South Korea? ›

The main two political parties in South Korea are the liberal Democratic Party of Korea (lit. "Together Democratic Party", DPK) and the conservative People Power Party (PPP), formerly the United Future Party (UFP). The liberal camp and the conservative camp are the dominant forces of South Korean politics at present.

What political system does South Korea use? ›

South Korea has a multi-party system, with two dominant parties and numerous third parties. Elections are overseen by the Electoral Branch of the National Election Commission. The most recent presidential election was held on 9 March 2022. The president is directly elected for a single five-year term by plurality vote.

Who controls Korea's economy? ›

Economy of North Korea. North Korea has a command (centralized) economy. The state controls all means of production, and the government sets priorities and emphases in economic development. Since 1954, economic policy has been promulgated through a series of national economic plans.

Who controls the South Korean economy? ›

Chaebol families have controlled South Korea's biggest companies for generations. The chaebol system is a legacy of South Korea's history. After an armistice ended the Korean War in 1953, the country's military dictators anointed a handful of families for special loans and financial support to rebuild the economy.

Is South Korea richer than North Korea? ›

In 2022, South Korea's nominal gross domestic product (GDP) amounted to around 2,080 trillion South Korean won, while that of North Korea was approximately 36.2 trillion South Korean won. With this, South Korea's nominal GDP was around 57 times greater than that of North Korea.

Why is South Korea's economy so strong? ›

Innovation and technology are the key factors that have underpinned South Korean export competitiveness and fueled the country's remarkable economic rise over the past decades.

Is South Korea's economy strong or weak? ›

Recently, inflation slowdown has been moderated, while the Korean economy's recovery continued to gain traction mainly driven by increases in manufacturing production and exports, and job growth remains strong.

What is South Korea's economy called? ›

Korea's Open Market Capitalist Economy : : The official website of the Republic of Korea.

What are rich families called in Korea? ›

A chaebol (/ˈtʃeɪbɒl, ˈdʒɛbəl/; Korean: 재벌, lit. 'rich family' or 'financial clique'; Korean pronunciation: [tɕɛ̝.

How did South Korea build its economy? ›

Utilising the US$ 1,500 million military aid provided by the USA, they built roads, bridges and other infrastructures which greatly helped Korean industrial firms. As South Korea lacked natural resources, growth through industrial development became the priority for which the state played a pivotal role.

Is South Korea richer than Japan? ›

A major geoeconomic event occurred in 2018 when South Korea's real GDP per capita surpassed that of Japan. By 2026, the International Monetary Fund projects that South Korea will be 12 per cent ahead of Japan.

What is the main economy of South Korea? ›

South Korea's economy has been growing rapidly since the 1980s with no signs of slowing down. The country boasts the 13th largest GDP in the world at more than $1.67 trillion in 2022. The economy is dominated by its services and industrial sectors, while agriculture makes up a very small portion of the economy.

What is South Korea in terms of economy? ›

After overcoming the economic crisis, the South Korean economy continued to record solid growth. The country's GDP more than tripled from USD 504.6 billion in 2001 to USD 1,646.3 billion in 2019, the 12th largest total in the world.

What is the political and economic system in North Korea? ›

The government system is a communist state one-man dictatorship; the chief of state is the president, and the head of state is the State Affairs Commission Chairman. North Korea has a command economy in which the central government directs the economy regarding the production and distribution of goods.

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