With GNI above 30,000 dollars, S. Korea must strengthen fundamentals

South Korea’s per capita gross national income was estimated at 27,561 U.S. dollars as of end last year. The country will most likely enter seamlessly an era of its GNI per capita surpassing 30,000 dollars in the first quarter of this year. The GNI per capita surpassed 10,000 dollars in 1995 and 20,000 dollars in 2006, respectively, and is set to top 30,000 dollars in 12 years since.

According to the International Monetary Fund, 27 countries have a GNI per capita in excess of 30,000 dollars among more than 190 countries worldwide. Of those countries, only 10 countries with a population of 10 million or more, excluding state-like nations, have a GNI per capita of 30,000 dollars or higher.

The Korean economy is off to a good start this year. Above all, external conditions that the Korean economy heavily depends on are favorable. The IMF predicts that since not only the G2 nations but also the Euro zone, Japan and Russia will see their investment, trade and industrial production rebound, the global economy will be on track to recovery. The IMF adds the global economy will pass the tunnel of a slow growth period and enter the phase of “intermediate speed growth.”

However, the South Korean economy is facing a flurry of potential risks this year. For one, a hike of the minimum wage and conversion of non-regular workers into regular workers, which the Moon Jae-in administration pushed for to help address economic inequity last year, can gradually bring about negative effect on the business community beginning from this year. The South Korean economy will also inevitably face a decline in industrial investment due to a hike in corporate tax and resulting stagnant job growth. Apart from the North Korean risks that are difficult to predict, South Korea’s combined household debts surpassing 1,400 trillion won (1310 billion dollars) remain a major potential risk factor to the Korean economy. As such, the government should use extra caution when implementing economic policy.

In order for the South Korean economy to post 40,000 dollars in GNI per capita early on after breaking the 30,000-dollar mark this year, and to improve people’s quality of life, the government should resolve the job issue more than anything. To do so, South Korea should improve its economic fundamentals when external conditions are favorable as is the case this year. It is for this reason that Bank of Korea Governor Lee Ju-yeol said in his New Year’s message, “Now is the right time to seek reform, when our economy is on track to recovery and the government is running an expansionary fiscal policy.” A patient can undergo a major surgery and survive only when physical condition is strong. It is hoped that the South Korean economy strengthens its fundamentals living up to the era of 30,000 dollars in GNI per capita through bold deregulation this year.