South Korea - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, the U.S. market share, the political situation if relevant, the top reasons why U.S. companies should consider exporting to this country, and other issues that affect trade, e.g., terrorism, currency devaluations, trade agreements.

Last published date: 2020-10-05

Korea’s market experienced a dramatic decline beginning with the first reported COVID-19 case on January 20, 2020, The Korea Small Business Federation reported that 97.6 percent of small businesses in Korea saw sales drop starting in mid-January due mainly to reduced consumer foot traffic and weaker sales. Indeed, the Korea Ministry of Land, Infrastructure, and Transport (MLIT) reported that public transportation usage in the country declined 51 percent for express buses, 56 percent for railroad trains, and 15 percent for highway traffic between February 21-24 compared to the same period last year.  Conversely, SSG.com, a leading on-line grocery store, reported that its grocery food sales grew 98 percent January 20 through February 20.  Market Curly, a top fresh food on-line retailer, reported that its daily sales of food products almost doubled in February as consumers opted for home-delivery orders.

According to Korea Development Institute, the value of the Korean won, in terms of the real effective exchange rate, will decline by about four percent in 2020 and change little into 2021.  Exports and imports will see huge initial downward pressure due to COVID-19, followed by a gradual upward trend led by increased goods exports in the second half of 2020. Inflation is expected to remain low due to shrinking economic activity and falling oil prices. Despite the sharp economic contraction, the unemployment rate is expected to edge only slightly upward to 3.9 percent in 202 from 3.8 percent in 2019 due to the drastic fall in the labor force participation rate.

In response to disruptions by COVID, the ROK Government announced a third rescue package in mid-April meant to protect businesses from failing. In all, the ROK Government has spent or announced plans to spend 135 trillion Korean won ($110 billion USD) in its COVID economic rescue effort, or around seven percent of GDP. 

Korea’s Gross Domestic Product (GDP) in 2019 was $1.64 trillion, ranking 12th in the world and third in East Asia (IMF estimates).  As Korea’s long-established strength in the steel and petrochemical industries has begun to wane in recent years, the country’s leaders are looking to more technology-intensive industries to drive growth. Such industries include healthcare (medical devices, pharmaceuticals, and biotechnology), industrial chemicals, information technology (IT) components, semi-conductor manufacturing, aerospace and defense, energy, environmental technology, transportation (including reviving the shipbuilding industry).

U.S. companies have already begun to identify opportunities in these growing industries. Additionally, U.S. firms have started partnering with local Korean companies to expand market opportunities to third-country markets, including ASEAN, the Middle East, and other Indo-Pacific markets. Korea remains one of the world’s most export-dependent industrialized nations, with exports valued at 40 percent of GDP. Given its robust shipping and air cargo infrastructure, Korea serves not only as a market destination for U.S. goods and services, but also as a hub for expansion into other markets.

PROFILE

Population (as of May 2020): 51.27 million

Capital: Seoul

Government: Democratic Republic

ECONOMY

2017

2018

2019

GDP ($ billions) *

1,624

1,720

1,642

GDP per capita (USD) *

31,617

33,340

31,682

GDP Growth (% change) *

3.2

2.7

2.0

Average Consumer Prices (% change)

1.9

1.5

0.4

Unemployment (% of labor force)

3.7

3.8

3.8

           Source: *OECD/Bank of Korea

TRADE

Foreign Merchandise Trade ($ billions)

2017

2018

2019

Exports to World from ROK

542.23

604.86

573.69

Imports from World to ROK

503.34

535.20

478.48

U.S. Exports to ROK*

49.28

57.62

57.89

U.S. Imports from ROK*

71.81

75.01

78.09

U.S. Trade Balance with ROK*

-22,53

-17.39

-20.20

Position in U.S. Trade

2017

2018

2019

Rank of ROK in U.S. Exports*

7

7

7

Rank of ROK in U.S. Imports*

6

7

7

ROK Share of U.S. Exports (%)*

3.1

3.2

3.2

ROK Share of U.S. Imports (%)*

3.0

2.8

2.9

         *bea.gov

Principal U.S. Exports to ROK (2019)

Principal U.S. Imports from ROK (2019)

1. Mineral Fuel and Oil (23.10%)                         

2. Nuclear Reactors, Boilers, Machinery (11.47%)

3. Electric Machinery, Sound Equipment, and TV Equipment (10.04%)

4. Optic, Photo, Medical and Surgical Instruments (6.10%)

5. Organic Chemicals (4.53%)

1. Vehicles (26.95%)
2. Nuclear Reactors, Boilers, and Machinery (19.37%)
3. Electric Machinery; Sound Equipment, and TV Equipment (18.22%)
4. Mineral Fuel and Oil (5.50%)
5. Plastics and Articles Thereof (3.70%).

 

BUSINESS AND ECONOMIC FREEDOM RANKINGS

World Bank Ease of Doing Business Ranking 2020: 5 of 190

Heritage/WSJ 2020 Index of Economic Freedom Ranking: 25 of 180

WEF World Competitiveness Ranking 2019: 13 of 141