"Ongoing Servitization of the Economy: Service Sector Accounts for 48.1% of Total Output"

Bank of Korea Releases "2023 Input-Output Tables (Extended Tables)"

As the share of services in Korea's industries continues to grow, the "servitization" of the economy has persisted. This trend indicates that the core of the domestic industrial structure is shifting from manufacturing to services.

Yonhap News

According to the "2023 Input-Output Tables (Extended Tables)" released by the Bank of Korea on the 24th, the increasing share of services in total output demonstrates the ongoing servitization of the Korean economy. The share of services in total output rose from 46.8% in 2022 to 48.1% in 2023. In contrast, the share of manufactured goods declined from 42.8% to 41.2%.

Looking at the servitization of manufacturing, the share of services among intermediate goods used in manufacturing saw a slight decline after 2020 but rebounded in 2023, mainly due to producer services. In particular, the share of "market research and management support services" used in the pre-production stage-where planning and market research are conducted before manufacturing-rose significantly. Boo Sangdon, head of the Input-Output Team at the Economic Statistics Department 2 of the Bank of Korea, explained, "The share of market research and management support services, which was around 2.2% in 2015, reached 2.7% in 2020, remained in the low 2% range, and then jumped to 3.1% in 2023."

The input-output tables are statistical matrices that record the production, consumption, investment, and export of goods and services in Korea. They are useful for analyzing the economic structure and the ripple effects between industries in terms of production and employment.

In 2023, Korea's economic structure was characterized by a decrease in both exports and imports, driven by falling prices of imported raw materials and reduced exports of computers, electronics, and optical devices. As a result, both the total supply (which equals total demand) size-6,802.7 trillion won-and the share of external transactions (29.6%) shrank. These figures represent decreases of 5.5 trillion won and 1.9 percentage points, respectively. The share of external transactions refers to the proportion of exports and imports in the total transaction amount (total supply or total demand).

In terms of industrial structure, the share of services in both total output and value added increased, while the share of manufactured goods declined. The value-added share of the energy sector, mainly driven by thermal power, also rose. The value-added share for electricity, gas, water, and waste management increased from 1.0% in 2022 to 2.1% in 2023.

In terms of input structure, the decline in raw material prices led to a decrease in the input value of imported intermediate goods, resulting in lower intermediate input rates and import dependency. The intermediate input rate fell from 59.9% in 2022 to 58.8% in 2023, while import dependency dropped from 14.9% to 13.6%. Looking at the composition of intermediate goods, the share of manufactured goods such as basic materials decreased from 51.7% to 50.5%, while the share of services, mainly producer services, increased from 33.0% to 35.4%.

Regarding the composition of final demand, the share of consumption, mainly in the private sector, increased from 45.8% to 48.0%. In contrast, the shares of investment and exports declined to 22.6% and 29.4%, respectively. Within private consumption, the share of services such as transportation and food and accommodation rose from 73.1% to 74.0%.

In external transactions, the export ratio fell from 18.5% to 17.3%, mainly due to declines in chemical products, computers, electronics and optical devices, wholesale and retail, and transportation. The import ratio also decreased from 16.0% to 14.9%, primarily in mining products, chemical products, and metal products.

In 2023, both the production inducement coefficient (from 1.818 to 1.827) and the value-added inducement coefficient (from 0.729 to 0.752) increased year-on-year, due to higher domestic intermediate input rates and value-added ratios.The import inducement coefficient (from 0.271 to 0.248) declined as import dependency fell.

Looking at the share of production, value-added, and import inducement by final demand category, the share induced by consumption increased across the board, while the share induced by exports decreased in all areas. Boo explained, "Consumption increased mainly in transportation and food and accommodation services," adding, "This reflects the increase in face-to-face activities and travel demand after COVID-19." He also noted that the decline in exports resulted in a relative increase in the share of consumption.

In 2023, the number of full-time equivalent (FTE) employees was 25.99 million, an increase of 560,000 (2.2%) from the previous year, mainly among wage workers. Among wage workers, the share of regular employees rose from 79.5% to 80.7%, while the share of temporary and daily workers fell from 20.5% to 19.3%. "Full-time equivalent" refers to converting the working hours of part-time employees into the average working hours of full-time employees to measure the actual amount of labor input in production activities. For example, if one full-time employee A and one part-time employee B are employed for a year, working 8 and 4 hours per day respectively, the headcount is two, but the FTE employment is 1.5.

In terms of labor inducement effects, the employment inducement coefficient in 2023 was 8.2 persons per 1 billion won of final demand, and the job creation inducement coefficient was 6.2 persons.

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