Early 2022 saw South Korea’s Covid 19 numbers soar amidst the spread of the Omicron variant. But as quickly as the numbers went up, the Omicron wave broke, and numbers fell allowing the South Korean government to relax restrictions as the health care system was able to handle serious cases, and the country is moving towards “Living with Covid” and treating Covid as endemic.  Close to 40 percent of the population became infected, though death rates and serious cases remain relatively low.  After dropping into the low four digits, new infections rebounded to over 40,00 per day in mid-July. 

Major changes in South Korea’s fiscal policy stance are unlikely over the next two years, despite the March 2022 election of opposition People’s Power Party (PPP) candidate, Yoon Suk-yeol, as President.  President Yoon will need to work with National Assembly controlled by the opposition Democratic Party, at least until the next legislative elections in 2024.  South Korea’s National Assembly approved a 16.9-trillion-won ($14.2 billion) supplementary budget on February 21, 2022, aimed partly at funding the response to COVID-19 and supporting businesses hit by pandemic restrictions.  With the latest supplementary budget, total government spending increased to a record 624.3 trillion won ($515 billion) for 2022.  While Korean growth remains steady, even in the face of the COVID-pandemic, inflation has increased, largely driven by higher costs for imported fuel and industrial inputs.

After decades of rapid growth, Korea’s long-established strength in the steel and petrochemical industries has waned and Korea has become a leader in high-tech industries.  The industries targeted by the Korean Government include healthcare (medical devices, pharmaceuticals, and biotechnology), industrial chemicals, information technology (IT) components, semi-conductor manufacturing, aerospace and defense, energy, environmental technology, and 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 of goods and services valued at 36 percent of GDP in 2020.  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 June 2022): 51.3 million

Capital: Seoul

Government: Democratic Republic

Source: *Bank of Korea/**Statista.com

TRADE

Source: *bea.gov/**Korea International Trade Association

Source: USA Trade Online

BUSINESS AND ECONOMIC FREEDOM RANKINGS

Transparency International Corruption Perceptions Index 2020: 32 of 180

Political & Economic Environment:  State Department’s website for background on the country’s political environment.