South Korea Expected to Enter $40,000 GDP Era by 2028... 5 Years Later than Major Countries

Hankyung Research Institute Analyzes Time Required for Per Capita GDP of $30,000-$40,000
G5 Average 6 Years vs. Korea 11 Years
"Enhancing Private Sector Vitality Is Key to Early Achievement of Growth Momentum"

[Asia Economy Reporter Kim Heung-soon] It has been claimed that South Korea will take an average of 5 years longer than major advanced countries to achieve a per capita Gross Domestic Product (GDP) of $30,000 to $40,000.

On the 24th, the Korea Economic Research Institute (KERI) under the Federation of Korean Industries estimated that South Korea will reach a per capita GDP of $40,000 by 2028, analyzing that it will take 11 years to reach $40,000 after achieving $30,000 per capita GDP in 2017.

In contrast, the G5 countries (United States, United Kingdom, Japan, Germany, France) took an average of 6 years to reach $40,000 after entering the $30,000 per capita GDP mark, showing that their entry speed was about 5 years faster than South Korea.

Choo Kwang-ho, Director of Economic Policy at KERI, said, "During the period when the G5 countries had a per capita GDP between $30,000 and $40,000, they showed common traits such as high labor productivity, active investment, and balanced growth between the private and government sectors," adding, "South Korea should benchmark these and expand growth engines in the real economy through regulatory reforms and corporate tax cuts."

During the $30,000 to $40,000 per capita GDP period, the hourly labor productivity of the G5 averaged $51.5, which was 1.3 times higher than South Korea's hourly labor productivity of $39.4 from 2017 to 2019. The employment rate of the G5 also averaged 68.7%, surpassing South Korea's employment rate of 66.7%. Additionally, during the $30,000 to $40,000 period, the G5's gross fixed capital formation grew at an average annual rate of 3.2%, driving economic growth through investment, whereas South Korea's gross fixed capital formation decreased by an average of 0.3% annually from 2017 to 2019.

Total factor productivity (TFP), which indicates the production efficiency of a national economy, was also found to be lagging in South Korea compared to the G5. During the G5's $30,000 to $40,000 per capita GDP period, TFP increased by an average of 0.79% annually, while South Korea's TFP increased by 0.36% in 2017.

Differences were also observed in growth rates by economic agents between major advanced countries and South Korea. According to KERI, during the G5's $30,000 to $40,000 per capita GDP period, the private and government sectors grew in balance, whereas in South Korea, after entering the $30,000 mark, private sector vitality declined and government-led growth predominated.

Regarding consumption (average annual growth rate), the G5 saw private consumption increase by 2.5% and government consumption by 2.6% during the period, while South Korea's private consumption grew by 2.4% and government consumption by 6.0% from 2017 to 2019, highlighting a significant increase in government consumption. In terms of investment (average annual growth rate), the G5's private and government investments increased by 1.9% and 3.6% respectively, whereas South Korea's private investment decreased by 4.2% while government investment increased by 7.0%, showing a contrasting trend.

This content was produced with the assistance of AI translation services.