Korea Economic Snapshot
Economic Survey of Korea (September 2022)
Sound health management and supportive policies helped Korea emerge swiftly from the pandemic. The recovery is set to continue as pandemic-era restrictions on contact-intensive services are shelved, despite the Russia-Ukraine war raising inflation and highlighting the need to increase supply chain resilience. Reducing dependence on fossil fuels can boost resilience, but is also necessary to reach ambitious climate targets. Fiscal policy support will need to be scaled back and should focus on supporting people and business dynamism rather than firm survival. The productivity gap between small and large, highly productive companies is reflected in labour market dualities of income, job quality and social protection. Gaps in the social safety net largely follow the same fault lines, and a large share of elderly are left with very low retirement income. These inequalities spur fierce competition among young men and women to enter prestigious universities and good jobs and slows down youth’s labour market entry and family formation against a backdrop of a very low fertility rate.
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Economic Forecast Summary (June 2022)
Growth will moderate to 2.7% in 2022 and 2.5% in 2023. Consumption is set to strengthen, though with a drag from high inflation. From early 2023, growth will pick up due to strong investment and exports, as current uncertainties are assumed to abate. Elevated household debt and housing prices, and stronger than expected interest rate increases pose downside risks to domestic demand. A potential shortage of rare gases sourced from Russia and Ukraine could weaken semiconductor exports.
Reform Priorities (April 2021)
Going for Growth 2021 - Korea
The pandemic highlighted vulnerabilities of the dual labour market and a weak social safety net. A welfare reform needs to be coupled with policies aimed at increasing employment and job quality, especially for women and older workers, who are often in non-regular jobs and the most affected by the crisis. A more flexible labour market would allow workers to move more easily from crisis-hit sectors to growing industries.
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2021 Structural Reform Priorities
- Social protection: Strengthen the social safety net and improve the efficiency of the tax system
- Labour market: Reform employment protection legislation
- Labour market: Strengthen policies to support employment of women and older persons
- Competition and regulation: Reduce the regulatory burden on economic activity
- Environmental policy: Strengthen environmental regulations and price signals