Analysis of Economic Situation, Potential, and Risk Factors in Korea, China, Japan, Germany, Greece, and Russia
Authors:   Asia-Europe Perspective Association, Kim Keun-So 
Published: June 2018

The main purpose of this paper is to examine Korean economic situation and characteristics, potential, and risk factors by comparing those of major Eurasian countries such as China, Japan, Germany, Greece, and Russia, along with US. Economic situation and characteristics include GDP, economic growth rates, trade openness, and industrial structure. The annual geometric growth rate of GDP in Korea was 15.4% in 1980s but tend to gradually decrease to 6% from 1990s to 2010s. China, the largest trading partner in Korea, records amazing annual geometric growth rate of 15% for 24 years from 1990 to 2014, reaching US$ 10.4 trillion of GDP in 2014. Trade openness (%) in Korea, measured as total of exports and imports of goods and services divided by GDP, is 103% in 2013 which is highest among those examined countries. Compared to the industry structures of developed countries such as US, Japan, and Germany, the ratio of the manufacture sector to GDP in Korea is too high, while the ratio of the service sector is too low. The relatively high employment in the service sector of Korea indicates that the productivity of the service sector is very low in Korea.
This research focus on education, FDI, stock market development, and R&D expenditure as economic potential. The tertiary education enrollment in Korea is the second highest among those countries. The high tertiary enrollment does not necessarily imply that highly educated human capital is a strong driver of economic growth. The tertiary education enrollments in Greece and US are ranked in the first and third. These three countries including Korea struggle for relatively high unemployment of youth people. Oversupply of highly educated human capital may be a reason of high unemployment of youth people. Thus, high proportion of human capital with tertiary education may not be a strong point of Korea economy. Although Korea economy is characterized as highly open economy, FDI inflow and outflow is very low, compared to other countries. FDI is not economic potential for Korea. Stock market in Korea has rapidly increased. The ratio (%) of Korean stock market capitalization to GDP is 96.5% in 2012 which is highest among major Eurasian countries analyzed by this paper. Korea economy has been shifted from bank-oriented financial system to capital market-oriented system. The stock market becomes a major channel to financing companies in Korea. The percentage of R&D expenditure divided by GDP in Korea is 4% which is highest. However, the proportion of high-technology product exports out of goods exports in Korea tend to decrease. As Chinese exports move toward high-technology products, stronger competition of these product exports results in reducing Korean high-technology product exports.
As economic risk factors, the paper examines economic inequality, debt, unemployment, and aging with fertility. Among these factors, private sector’s debt, youth unemployment, and aging with low fertility appear to be major risk factors in Korea. The private debt ratio to GDP in Korea is ranked in second behind China. The private debt ratios of Korea sharply increased to 138.5% in 2014 from 46.8% in 1990, while that of China has increased to 141.8% in 2014 from 84.5% in 1990. Although Korea faces more rapid increase in private debt than China from 1990 to 2014, the recent debt increase rate of China from 2010 to 2014 is much higher than that of Korea. Thus, the private debt of these two countries can be regarded as a serious risk factor. In regards to public debt, Japan and Greece face the serious problem of high government debt. As of 2012, Japan’s public debt ratio to GDP is 196% which is highest. The unemployment percentage and income inequality are not high in Korea compared to other countries. However, it is noteworthy that youth unemployment rate is three times as high as total unemployment rate. The lowest fertility rate of Korea will cause unprecedentedly rapid population aging of Korea