A Shrimp between Fighting Whales: Lessons from the Economic Convergence of South Korea

P. Kiss, Gábor and Szőke, Katalin (2022) A Shrimp between Fighting Whales: Lessons from the Economic Convergence of South Korea. FINANCIAL AND ECONOMIC REVIEW, 21 (2). pp. 188-197. ISSN 2415-9271 (print); 2415-928X (online)

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Abstract

Having started as a poor, war-worn agricultural country in the mid-20th century, South Korea is now the world’s 12th largest economy. The lesson from the country’s economic convergence is that export-led growth, strong corporate competitiveness and significant research and development expenditure are essential to avoiding the middle-income trap. Relying on its strong education system, South Korea managed to become a key player in many high-tech industries. However, the challenge for the future is that income inequalities exceed the average of developed countries, and the persistently low fertility rate results in an ageing society. In addition, household indebtedness exceeds 100 per cent of GDP and around half of the housing loans are variable rate loans, which jeopardises the stability of the financial system.

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