[비즈한국] Thanks to an unprecedented semiconductor boom, the possibility is growing that South Korea will not only achieve 3% economic growth and secure over 100 trillion won in additional tax revenue this year, but also finally break out of the $30,000 per capita GDP trap that has held it back since 2016. This is driven by high economic growth following record-breaking performances by SK Hynix and Samsung Electronics, as well as a sharp drop in the previously high exchange rate as $26.57 billion (approximately 40 trillion won) flowed into the domestic market due to the listing of SK Hynix American Depositary Receipts (ADR). With the average KRW-USD exchange rate in August falling to the 1,410-won range, it is now almost certain that the country will surpass the $40,000 per capita GDP barrier for the first time in 11 years, provided the exchange rate remains at this level for the rest of the year.
Presiding over a cabinet meeting at the Blue House on the 14th of last month, President Lee stated, "The next 30 years of the Republic of Korea will depend on the achievements we make in the second half of this year." He added, "Please unite our efforts so that this year will be remembered as the inaugural year for leaping toward an 'irreplaceable Republic of Korea' with a potential growth rate of 3%, ranking among the world's top 4 in trade, and reaching $50,000 in national income." Since national income is calculated by adding overseas income to GDP and subtracting overseas payments, a higher GDP leads to a higher national income.
The possibility of per capita GDP escaping the $30,000 trap, where it has been stuck for 10 years, is rising. South Korea’s per capita GDP rose to $37,534 in 2021 due to base effects following the COVID-19 pandemic and government stimulus measures, but it fell back to $34,875 in 2022 due to inflation triggered by the Russia-Ukraine war and subsequent interest rate hikes, and has been hovering in the $36,000 range since. Last year, the per capita GDP was $36,414.
However, recent forecasts for South Korea's nominal growth rate and exchange rate trends suggest that the dream of a $40,000 per capita GDP will be realized this year. In the second-half economic growth strategy released last month, the government projected that the South Korean economy would grow by 3.0% this year, fueled by strong exports due to the semiconductor super-boom. This is a 1.0 percentage point upward adjustment from the 2.0% forecast presented in January of this year.
Furthermore, the nominal growth rate, which reflects inflation, has been significantly adjusted upward from an initial 4.9% to 12.3%. If the government's expectations hold, the nominal growth rate will reach its highest level in 30 years, since 1996 (12.3%). It would also mark the first time in 24 years, since 2002 (11.0%), that the nominal growth rate has recorded double digits.
When this nominal growth rate is applied to the 2025 nominal GDP of 2,676.6748 trillion won as stated in the Ministry of Economy and Finance’s "Green Book" (Recent Economic Trends), this year’s nominal GDP is estimated to reach 3,005.9058 trillion won. This means the scale of the South Korean economy will exceed 3,000 trillion won for the first time in history. It has taken eight years to grow from the 2,000 trillion won mark, which was first surpassed in 2018 at 2,006.9745 trillion won, to the 3,000 trillion won range.
Applying this year’s average KRW-USD exchange rate of 1,480.1 won (as of 3:30 PM, Jan. 3 to Aug. 19) to this year’s nominal GDP projection results in $2.0309 trillion. This will be the first year that the South Korean economy has exceeded the $2 trillion scale in dollar terms. Dividing this dollar-based nominal GDP by the total projected population of 51,609,121 for this year from the National Statistical Office results in a per capita GDP of $39,351—just $649 short of the $40,000 mark.
However, as the exchange rate has been falling recently, it is highly likely that the leading digit of the per capita GDP will change to a 4 within this year. This is because a year-average exchange rate of 1,456.1 won would result in exactly $40,000 per capita GDP. The KRW-USD exchange rate, which had climbed as high as 1,555.8 won in early July, is now plummeting due to the inflow of dollars from the SK Hynix ADR listing.
As it dropped below 1,400 won for the first time in 11 months, hitting 1,397.9 won on August 19, the average exchange rate for August (Aug. 3–19) has fallen to 1,418.7 won. To achieve an annual average exchange rate of 1,456.1 won for a $40,000 per capita GDP era, the average exchange rate for the remaining period only needs to be 1,432.1 won. Given the current trend of it falling into the 1,300-won range, the possibility of achieving this is high.