South Korea: Macroeconomic Country Outlook
- According to GlobalData, the country’s economic growth is forecast to slow down to 2.8% in 2022.
- South Korea was ranked 11th out of 136 nations in the GCRI Q1 2022.
- Industrial production and retail trade grew by 3.9% (Y-o-Y) and 1.6% (Y-o-Y) in February 2022, respectively.
According to the Heritage Foundation, Index of Economic Freedom (2022), South Korea was considered the 19th freest economy among 184 nations, with a score of 74.6 out of 100. Moreover, the country secured the fifth rank among 39 countries in the Asia–Pacific region, and its overall score is above the regional and world averages.
Key findings
- South Korean economy on a recovery path: According to the Ministry of Economy and Finance, mining and manufacturing grew by 6.5% Y-o-Y in March 2022. During the same period, exports increased by 18.2%, compared to the previous year, backed by strong semiconductor, petrochemical, and other major exports. In February 2022, retail sales grew by 1.6% Y-o-Y. The economy added 831,000 jobs on an annual basis in March 2022 and the unemployment rate decreased by 1.3 percentage points from the previous year of 3.0%. According to GlobalData, the economy is forecast to grow by 2.9% in 2022.
- Robust 5G in South Korea: South Korea is one of the leading global information and communication technology centers. According to the Ministry of Science and ICT, the total number of 5G subscribers in the country reached 20.2 million, accounting for 28% of the total 72.6 million mobile subscriptions in November 2021. As of January 2022, the country has 5G coverage across 85 cities. In July 2021, Samsung and KT launched South Korea’s first commercial standalone (SA) 5G network services. In April 2022, Nokia launched a Private 5G Open Lab in Seoul, which aims to encourage the development of 5G private wireless network in the country. Moreover, Nokia would also partner with Korean companies engaged in developing solutions and services for 5G private wireless network.
- South Korea was ranked fifth out of 190 countries in World Bank’s doing business ranking in 2020: South Korea’s score (84 out of 100) in the ease of doing business is higher than Australia (80.7), China (74), India (67.5) and the regional average (62.7) in 2020. It takes only eight days to start a business in South Korea as compared to the OECD high-income average of 9.2 days. The country was ranked second in the parameters of enforcing contracts and getting electricity, 12th in dealing with construction permits, 11th in resolving insolvency, and 33rd in starting a business.
- R&D sector of the country: According to the World Intellectual Property Organization, Global Innovation Index (2021), the country secured fifth position among 132 economies. The country stood at first position among the 17 economies in Southeast Asia, East Asia, and Oceania. South Korea secured first position on various indicators, which includes research and development, researchers FTE/million population, information and communication technology, government’s online services, e-participation, research talent, % in businesses, patent families/billion PPP$ GDP, research talent % in businesses and second rank on gross expenditure on R&D, % GDP. In May 2022, the government announced to invest $693 million in the pharmaceutical industry to boost R&D for new drugs and manpower. In April 2022, the US-based company, Lam Research, opened a new research center in South Korea with $100 million of investment.
- Country emphasizing on renewable energy: In March 2022, the government announced to boost nuclear power in the country through resuming the construction of Shin Hanul 3, and 4 and make South Korea a powerhouse in nuclear power generation by 2030. Additionally, the project would also create 100,000 jobs in the country. However, the country envisages freeing itself of nuclear power by 2079 through reduction in the nuclear energy's share of power mix to 17% by 2034 and 6.1% by 2050. In April 2022, the country is expected to build a floating city on ocean surface along the coast of Busan with investment of nearly $627 million and capacity to hold 12,000 people. The designers intend for the city to grow food, produce solar energy and collect and filter fresh water in order to contribute towards zero emission goal. The construction would be made of lightweight, sustainable materials like timber and bamboo, expected to operate before 2025.
- South Korea announces strategy to achieve $700 billion in annual exports by 2025: A strategy was announced in March 2021 by the Ministry of Trade, Industry and Energy to increase annual exports to $700 billion by 2025 through the expansion of future growth engines and innovation in trade structures. To increase exports in bio-health products, the ministry would invest around $4.4 billion and spend another $17.5 billion on trade financing for services in the FinTech, engineering services, digital services, healthcare and edutech sectors.
Key fundamentals
Sectoral outlook
- Tourism to gradually recover: In August 2021, the government announced an investment of KRW8.8 trillion ($8 billion) in culture, sports, and tourism in its proposed budget for 2022. According to GlobalData, international tourist arrivals in the country contracted by 64.3% in 2021, however, is forecast to grow by 1,193.1% in 2022 on reopening measure. GlobalData’s latest report, ‘South Korea Source Tourism Insight Report, including International Departures, Domestic Trips, Key Destinations, Trends, Tourist Profiles, Analysis of Consumer Survey Responses, Spend Analysis, Risks and Future Opportunities, 2022 Update’ reveals that outbound travel from South Korea is projected to exceed pre-pandemic levels by 2024 with international departures growing at a compound annual growth rate (CAGR) of 7.3% between 2022 and 2025. By 2025, international departures are expected to reach 30.3 million, according to GlobalData forecast.
- South Korea expected to witness growth in semiconductors: Currently, South Korea is the largest semiconductor equipment exporter in the world. As a result, major companies have invested large amounts of capital in the sector. In May 2021, the country announced to invest $451 billion on domestic semiconductor production over the next decade through a mixture of funds from government support packages, tax incentives, and corporate investment pledges. During the same month, Samsung anticipated to invest $151 billion by 2030 in its System LSI and Foundry businesses. Additionally, semiconductor company SK Hynix would also spend $97 billion in the country. In May 2022, Samsung unveiled a plan to open a new foundry in Texas by 2024.
- Steps towards development of renewable energy in the country: The Government of South Korea aims to phase out nuclear and coal energy to achieve 20% renewable power generation by 2030. In December 2020, the country aims to increase its solar generation capacity by five times to significantly increase its share in the energy mix. To achieve the objective, it plans to construct 30.8 GW of solar power generating capacity and 16.5 GW of wind power capacity over the next 12 years. In August 2021, the government announced to invest KRW11.9 trillion ($10.8 billion) in its proposed budget for 2022. In May 2022, South Korea’s Hanwha Solutions announced to invest $150 million in the country to produce solar energy. During the same month, South Korea selected Offshore Design Engineering (ODE) company for the construction of 384MW Yokji offshore wind farm. The project is expected to be operational by 2026.
GlobalData Country Risk Index (GCRI) – Q1 2022
South Korea was ranked 11th out of 136 nations in the GCRI Q1 2022. The country’s score is in the very low risk nations band (below 30). South Korea’s overall risk score (22.8) was lower than the average of Asia–Pacific (31.3) and the world average (43.5) in GCRI Q1 2022. The country has a very advanced technology sector and is a leader in semiconductor manufacturing in the world. Consistent government policies to support economic growth have transformed the country.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources and incorporates proprietary data from GlobalData. Asia-Pacific nations in this publication include China, South Korea, Malaysia, Thailand, Indonesia, Singapore, Australia, Vietnam, the Philippines, and New Zealand.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: South Korea
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