Incomes Not Keeping Up With GDP Growth

The Korean economy recorded four percent growth last year, but Korea’s national income increased by a mere 0.5 percent, the lowest since the foreign exchange crisis.

National income growth has surpassed the economic growth rate only once since 1996. This means that Koreans have not become affluent despite the country’s economic growth.

According to a Bank of Korea report yesterday, Korea’s gross national income (GNI) grew only 0.5 percent last year from the previous year based on constant 2000 market prices. This is the lowest rise since GNI growth dropped by 8.3 percent in 1998.

The GNI growth rate has fallen short of the economic growth level for the 10th consecutive year except for 2002. One probable cause is exports at low prices combining with imports at high prices.

Trading conditions have worsened even more with the international oil price hike and a drop in semiconductor prices last year. Accordingly, the actual income fell by 46 trillion won, twice of that of 2004. In such a situation, despite an improving economic indicator, business sentiment will not pick up.

Shin Min-yeong, researcher at the LG Economic Research Institute, said, “Trading conditions are usually decided by external powers and so cannot be changed in a short time. The industrial and export structures should be developed in the long run.”

The GNI index stood at a standstill but the per capita GNI in dollar terms marked $16,291 last year, up by $2,098 or 14.8 percent from 2004. However, in won terms, it increased by a mere 440,000 won or 2.7 percent from 16.25 million won in 2004 to 16.69 million won last year.

Some sort of an optical illusion has occurred as the Korean won gained steeply against the dollar last year. The won-dollar rate fell by 11 percent from the 2004 average of 1,144 won per dollar to 1,024 won last year. This rate is currently on a downtrend standing at 973.5 won as of March 22 and is expected to have a significant influence on this year’s national income.

Kyung-Joon Chung news91@donga.com