by Joseph Yun Li-sun

South Korea has withstood the world’s financial crisis. Its economy has begun to expand again thanks to a low won and its industrial sector’s great capacity. However, abortion and reunification with the north are a threat to the future.

Seoul (AsiaNews) – South Korea is the only country that, despite last year’s serious financial crisis, was able to expand its industrial output, this according to the International Monetary Fund and World Bank data for the third quarter.

The IMF, in its semi-annual projections released in October, forecasts an average annual economic expansion rate of 4.6 per cent over the next five years, compared with 2 per cent in Japan and 2.3 per cent in advanced economies as a group.

Capital investment in South Korea rose 10.4 per cent in the third quarter, central bank data shows. By comparison, Japanese capital spending tumbled a record 26 per cent,

The state-run Korea Development Institute expects investments to surge 17 per cent next year.

In crisis-hit 2008, Korean spending slipped 2 per cent, compared with a 37 per cent cut by Japanese companies in the past fiscal year to March.

Whilst behind China and India in the pace of growth, South Korea's per capita gross domestic product is about US$ 16,400 this year, more than four times that of China and 16 times that of India.

The reason for the situation is a low won, which fell 20 per cent against the dollar in the past two years, a period when the yen soared 25 per cent. The won's depreciation left it "undervalued” and gains next year will give Korean industrial stocks an "extra boost",

At the same time, whilst South Korea has an important service sector and financial markets, its stock exchange is relative small compared to others and so falling stocks did not affect the country too much. By contrast, the country is very strong in engineering and electronics. Some of its major firms like Hyundai Motor to LG Chem are known around the world and were able to withstand the recession, and are now ready to start exporting again.

However, an aging population and North Korea could negatively affect South Korea’s recovery. On the one hand, a World Bank report said that the country might find itself with more retirees compared to employed workers by 2050, a situation aggravated by easy access to abortion.  On the other, North Korea remains a challenge. Should the south be reunified with one of the remaining Communist nations in the world, which has a population of 22 million living on the edge of poverty, its GDP would plunge and northerners are likely to pour across the border in record numbers.

• south
• korea
• economy
• crisis
• expansion
• gdp
• industry
• abortion
• aging
• communist
• north