Korea's per capita income surpasses $30,000

GDP grows at slowest pace in 6 years in 2018

By Lee Kyung-min

Korea's per capita gross national income (GNI) surpassed $30,000 for the first time in 2018, 12 years after the figure first surpassed $20,000 in 2006.

The Bank of Korea (BOK) said Tuesday that the GNI reached $31,349 last year, up 5.4 percent from the previous year.

The central bank forecast that Korea will be able to see the figure reach $40,000 in less than a decade if Asia's fourth-largest economy continues to sustain growth similar to the potential growth rate when excluding variables, such as foreign exchange rates.

GNI per capita surpassing $30,000 is largely considered here as an indication that a country has become an advanced economy.

The U.S. GNI was $61,247 in 2018, followed by Australia at $55,932, the Netherlands' $48,954, Germany at $45,923 and Japan, 39,561, according to United Nations data provided by the BOK.

The central bank stated that in order for Korea to achieve $40,000 per capita GNI, many issues need to be taken into consideration.

“With strong economic fundamentals as a basis for setting priorities on solving structural problems, multiple factors should be considered including the rapidly ageing society, a widening income gap, rising unemployment, soaring household debt and weak consumer sentiment,” a BOK official said.

Market experts said that with the GNI surpassing $30,000, the government's role in addressing and solving growing inequality is becoming crucial.

“It is the government's job to map out policies to better address various social issues such as the widening gap between the haves and have-nots, chronic youth unemployment and the low birthrate,” said Lee Chae-woong, a professor emeritus of economics at Sungkyunkwan University.

Although the much-touted feat is certainly a milestone, any significance in rising income will be undermined unless relevant questions are dealt with.

“If people feel a shared sense of injustice about their living conditions, numbers will be rendered meaningless. I guess it is the government's job to choose the path from now on,” said Lee.

The central bank also reported that Korea's real gross domestic product (GDP) grew at 2.7 percent in 2018, the slowest expansion since 2012 when the economy expanded 2.3 percent.

The key culprit behind the poor performance was mainly companies slashing investment amid worsening business conditions caused by the government's economic policies, such as rapid hikes in the minimum wage.

In the fourth quarter of last year, the economy grew 1 percent from the quarter earlier, an improvement from that quarter's 0.6 percent.

In nominal terms, GDP expanded 3 percent in 2018, the worse performance since 1998, when it contracted 1.1 percent, amid the fallout from the Asian financial crisis.

Nominal GDP, calculated at current market prices, reflects how regular consumers feel about the economy.

A slower growth rate of nominal GDP means a slower growth rate of nominal income, which indicates related activities including consumption and investment may show signs of slowing.