Wealth gap widens between Korea, G7 countries

Containers are piled up for overseas shipment at a port in Busan, Oct. 11. Yonhap

Korea is falling further behind G7 countries in gross national income (GNI) per capita, after overtaking Italy briefly in 2020 in the midst of the COVID-19 pandemic.

A measurement to track national wealth, GNI is a sum of a country’s gross domestic product (GDP) and net income from abroad.

Citing data from the World Bank, Monday, the Bank of Korea (BOK) said Korea’s GNI per capita in 2022 totaled $35,990.

The figure was up from $33,040 in 2020 and $35,110 in 2021. But it still fell short of bolstering Korea to outpace Italy, which is ranked at the bottom in GNI per capita among the G7 countries, according to the BOK.

Italy reported a GNI per capita of $32,420 in 2020, $610 less than Korea’s, as the pandemic hit the European country worse than others in the region.

It then logged $36,130 in 2021, outpacing Korea by $1,020, before posting $37,770 in 2022 to lead Korea again by $1,710.

“The 2020 GNI per capita once raised hopes that Korea, after rising from the ashes, can be even wealthier than G7 countries in the years to come,” said Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI).

“And it turns out that Korea fared better than Italy temporarily because Italy struggled harder under the pandemic, not because Korea’s economic potential is getting more competitive than those of the G7,” he added.

According to Lee, the currency value against the U.S. dollar, GDP and GDP deflator are crucial for a country’s GNI to grow.

Under the circumstances, the value of the Korean won averaged 1291.05 per dollar in 2022, down 12.89 percent from 2021.

During the cited period, the value of the euro also depreciated against the dollar. But its level of depreciation was 10.97 percent, which Lee said proved “to be more competitive than the won.” .

Korea posted 2.6 percent GDP growth in 2022 after its economy shrank 0.7 percent in 2020. Italy’s economy contracted 9 percent in 2020, but gained 3.7 percent in 2022.

GDP deflator is decided by taking into account GDP plus consumer inflation. Italy displayed a reading of 8.2 percent and Korea 5.1 percent.

“The fact that Korea’s wealth gap with Italy is widening suggests that the chance of catching up with wealthier G7 countries is more unlikely at the moment,” a Hanyang University economics professor said on condition of anonymity.

He referred to gap in GNI per capita which widened between Korea and each of the G7 countries except for Japan.

The gap between Korea and Japan diminished from $8,340 to $6,450 during the 2021-22 period as Japan reported a GNI per capita of $43,450 last year.

During the same period, Korea saw such a gap with the United States increase from $35,790 in 2021 to $40,380 in 2022.