Per Capital Income Exceeded $20,000 in 2007

Korea’s per capita GNI surpassed $20,000 for the first time in 2007. 12 years have passed since the nation’s per capita income exceeded $10,000 back in 1995, when it reached $11,432.

However, some economists predict that it will not be easy for the nation’s per capita income to remain at the same level this year due to the Korean currency’s depreciation and declining economic conditions at home and abroad.

The data released by the Bank of Korea yesterday showed that the country’s gross nation per capita GNI (gross national income) reached $20,045 (nominal amount of 18,626,000 won) and that GDP increased 5 percent in 2007.

GNI refers to a country`s gross national income at home and abroad each year and GDP reflects the total value of goods and service produced within the nation over a year.

The central bank said that the nation’s per capita GNI increased 8.9 percent in 2007, up from $18,401 in 2006. Korea`s real GDP growth rate reached 5 percent, exceeding the bank’s estimated growth rate of 4.5 percent. However, real GNI, a yardstick representing people’s purchasing power, increased a mere 3.9 percent. The large gap between real GNI (in won) and per capita income (in dollar) was a result of two factors: first, the won-dollar exchange rate has fluctuated sharply; and second, prices of imported goods, including raw materials, have significantly outpaced the price rise of Korea’s exports.

Choi Chun-shin, the director of the Economic Statistics Bureau of the BOK, said, “Korea’s GDP grew faster than expected last year because exports increased 12 percent from a year ago.” Export’s contribution to the nation’s GDP reached 26.7 percent in 2007, up from 25.9 percent in 2006.

A strong won certainly helped per capita income exceed the $20,000 mark. In 2007, the country’s per capita income jumped 5.9 percent from a year ago to reach 18,626,000 won. However, it increases a good 8.9 percent when it is calculated in dollars. The gap is due to the average won-dollar exchange rate increasing 2.8 percent year-on-year.

However, the current won-dollar exchange rate will become an obstacle for the country to achieve the $20,000 per capital income this year. The won-dollar exchange rate closed at 1,006.56 won yesterday, surging far past last year’s average exchange rate of 929.20 won. The won’s weakness against the dollar causes per capita income to fall.

Kwon Seon-wu, senior researcher at the Samsung Economic Research Center, said, “Given recent economic conditions including the current account deficit, this year’s foreign exchange rate is unlikely to grow faster than last year.”

Moreover, Korea’s real GDP is also likely to increase faster than the year before, given the U.S. economic slowdown and the rise in oil and raw material prices. Central bank governor Lee Seong-tae announced that the nation’s real GDP growth rate could be lower than the 4.6 percent estimated by the bank.

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