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[Opinion] Korea Breaks GDP Top 10

Posted April. 28, 2006 06:57,   


The size of the Korean economy has joined the ranks of the top 10. The IMF compared GDP in its “World Economy Forecast” report for each nation in 2005, and found that Korea’s GDP of $793 billion put it in 10th place.

It’s one step up from the 11th of the previous year. It’s something to celebrate, making the top 10 just nine years after the financial crisis. The government had put the estimated date at 2020.

The government is unexpectedly silent. The Ministry of Finance and Economy looks pressured, saying, “Neither the IMF nor our government has ever officially announced the size of the economy.” It wasn’t because of the economy growth or increased productivity, but because the value of the dollar unwittingly put us in the 10th place. Last year, Korea’s economic growth rate was a mere four percent, but the won value has gone up drastically. The statistics were based only on the estimated value of the converted dollar. Around July, when the actual purchasing power will become the standard and the accurate size of economy is announced, the ranking will be subject to change.

An example of this “trick” is the national account that the Bank of Korea announced in 2005. In dollars, per capita GNI increased 14.8 percent (2,098 dollars) since 2004 at 1,6291 dollars. But using won as the standard, from 16,250,000 won in 2004, the increase was only 2.7 percent (440,000 won) for a total of 16,690,000 won last year.

This is because the value of the dollar has dropped 11 percent from an annual average of 1,144 won in 2004 to 1,024 in 2005. Throwing inflation into the equation and actual income decreased. The index may scream success, but the public feels that the economy is not ailing.

Whatever the case, the GDP of each country is known to be the best index to understand the economy and welfare levels. If you rank 10th, the quality of living should live up to it. Without jobs, the quality of life will never improve. Restrictions should be lifted, public schooling improved, labor market more flexible so that work is available and consumption comes easy. The real question is whether Korea will rank 10th in the world for the heaviest taxes.

Kim Sun-deok, Editorial Writer, yuri@donga.com