Asia country report South Korea 2019

Country Report

  • South Korea
  • General economic

28th March 2019

Due to its high dependency on international trade, South Korea is highly susceptible to global protectionism and a hard landing of the Chinese economy.


asia sk 2019 pic1

asia sk 2019 pic2
asia sk 2019 pic3

Political situation

Decreased tensions on the Korean Peninsula - for the time being

Geopolitical tensions on the Korean Peninsula have decreased somewhat after several meetings between South Korea´s President Moon Jae-in and the North Korea´s leader Kim Jong Un last year and Kim Jong Un´s historical meeting with US-President Trump in June 2018. However, tensions over North Korea´s nuclear and missile program flaring up again cannot be ruled out. This or even an escalation of the conflict on the Korean Peninsula would have adverse effects on business and household confidence in South Korea and on foreign investors.

Economic situation

Increased uncertainty over the economic performance

After a year-on-year decrease in 2018, GDP expansion is expected to slow down again in 2019; mainly due to lower export growth. The domestic economy is impacted by a slowdown in construction activity as tighter mortgage lending rules have been imposed in order to contain the high indebtedness of Korean households (with debt levels at about 160% of disposable income). That said, fiscal support (increase in public employment, more social spending and another minimum wage increase) is expected to sustain economic expansion.


asia sk 2019 pic4

The agreement on a revision of the US-South Korea Free Trade Agreement in September 2018 has alleviated fears about the South Korean economy´s exposure to US punitive import tariffs. However, due to its high dependency on international trade and integration in the Asian supply chain South Korea is susceptible to risks stemming from an escalation of the Sino-US trade dispute and a hard landing of the Chinese economy. Exports account for about 50% of the country’s GDP, mainly semiconductors and other electronic goods, cars and chemical products.

asia sk 2019 pic5

A low public debt level (43% of GDP in 2018), low external debt (28% of GDP in 2018) and consistent current account surpluses provide the South Korean government with flexibility in supporting the economy and offer some protection against international trade and investment volatility.

More reforms needed to diversify the economy

It seems that South Korea’s current economic model - export driven and dominated by chaebols (the South Korean form of business conglomerate) - is no longer capable of providing sufficient employment and purchasing power growth. The outcome of government efforts to reform the conglomerates still remains to be seen. More reforms are needed to diversify the economy, away from an overly export-orientation towards growth driven by services and domestic consumption. The government has started measures to improve innovation and productivity of smaller businesses.

The high level of private debt remains a downside risk for the economy, together with a rapidly ageing population. Competition from China – by far the most important export market - is getting fiercer, as Chinese businesses are successfully climbing up the value chain in some of South Korea´s core export industries like automotive and electronics.


Related documents


Each publication available on or from our websites, such as, but not limited to webpages, reports, articles, publications, tips and helpful content, trading briefs, infographics, videos (each a “Publication”) is provided for information purposes only and is not intended as a recommen¬dation or advice as to particular transactions, investments or strategies in any way to any reader. Readers must make their own independent decisions, commercial or otherwise, regarding the information provided. While we have made every attempt to ensure that the information contained in any Publication has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in any Publication is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from its use, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof, be liable to you or anyone else for any decision made or action taken in reliance on the information in any Publication, or for any loss of opportunity, loss of profit, loss of production, loss of business or indirect losses, special or similar damages of any kind, even if advised of the possibility of such losses or damages.