Korea's per capita national income has failed to break through the $40,000 mark for the 12th year since first surpassing $30,000 in 2014. The slowdown in economic growth combined with a weaker won has dampened the pace of income gains.
During the same period, Taiwan, whose industrial structure is similar, surpassed Korea for the first time in 23 years by topping $40,000 in per capita national income last year. Japan, which had trailed Korea for two years amid long-term low growth, also overtook Korea again last year.
◇ Per capita GNI at $36,855 last year, up just 0.3%
According to the Bank of Korea on the 10th, Korea's per capita gross national income (GNI) last year was $36,855, up 0.3% from a year earlier. Gross national income (GNI) is calculated by adding income earned abroad to gross domestic product (GDP) and subtracting income paid overseas, and is a key indicator of the actual income level of a country's people.
Korea's per capita GNI first topped $30,000 in 2014 at $30,935 and kept rising to a record high of $37,898 in 2021. It then fell to $35,229 in 2022, and from 2023 ($36,195) through last year remained in the $36,000 range for three consecutive years.
In international comparison, Korea's pace of income growth is relatively slower. Among United Nations member states, excluding oil producers, with populations of 10 million or more, the countries whose per capita national income exceeds $40,000 are the United States, the Netherlands, Australia, Sweden, Belgium, Germany, Canada, the United Kingdom, France, Italy, and Japan. These countries took an average of 4.9 years to move from $30,000 to $40,000.
By contrast, Korea has been stuck in the $30,000 range for 12 years since 2014 and has not climbed into the $40,000 range. Taiwan, meanwhile, reached $40,585 in per capita national income last year, breaking the $40,000 mark in seven years.
Korea's economy has also slowed more than Japan's. Japan's per capita GNI last year was in the low $38,000s, higher than Korea's. Japan's economy has recently shown a slowing growth trend, but last year its economic growth rate was 1.1%, slightly above Korea's 1%.
◇ Weighed down by a weak won… "Regulatory easing and industrial restructuring are also needed"
The Bank of Korea cited the weak won as a key reason for the recent slowdown in national income growth. The average won-dollar exchange rate last year was 1,422 won, up 4.3% from a year earlier (a decline in the won's value). Even if income in won increases, it is assessed at a lower level when converted to dollars. By contrast, over the same period, exchange rates in Japan and Taiwan fell 1.3% and 2.9%, respectively, boosting their currency values.
Kim Hwa-yong, head of the national income division at the Bank of Korea, said, "Dollar supply-demand factors had a bigger impact than our economy's fundamentals, driving a sharp rise in the won-dollar exchange rate," adding, "As a result, the increase in per capita GNI in dollar terms was smaller."
Some analysis suggests that, assuming no exchange rate effects, the $40,000 threshold could be reached next year. Director General Kim said, "Since topping $30,000 in 2014, Korea's average nominal per capita GNI growth rate has been 4.4%," adding, "If there is no exchange rate impact and the nominal growth rate holds, it is possible to surpass $40,000 next year."
Experts say structural growth engines must be strengthened to speed up income gains. Moon Hong-cheol, a researcher at DB Financial Investment, said, "Excluding semiconductors, Korea's industrial competitiveness has weakened in several sectors compared with rival countries such as China," adding, "To boost fundamental growth potential, it is necessary to ease excessive regulations relative to other countries."
Ha Geon-hyeong, a research fellow at Shinhan Investment & Securities, said, "Domestic asset has been concentrated in real estate, which has weakened productivity," adding, "It is necessary to gradually reduce the real estate-centered lending structure and guide funds toward investment by corporations and productive institutional sector."