This study aims to capture the characteristics of the economic slowdown that Korea has sustained since the foreign exchange crisis in the late ‘90s and to assess the country’s past economic growth when compared to the international economy.
A growth accounting analysis found that Korea’s economic slowdown since the crisis was due in large part to the deceleration of factors input, especially that of capital accumulation. The rates of increase in capital and labor during 2001-2005 were lower than those during 1991-1995 by an annual 7% and 3% points, respectively. But the rate of increase in total factor productivity remained almost the same after the crisis or even rose a bit compared to before the crisis. Total factor productivity rose during 2001-2005 on average by 1.5-2.0% annually, which is almost the same level as or a bit higher than past figures.
An international comparison shows that Korea’s economic growth after the crisis was not low when viewed from a global standard. Korea’s GDP per economically active person during 2001-2004 grew on average by 2.9% annually, which was much higher than the 1.1% recorded by advanced economies and 1.3% by the five major Asian countries (excluding China). Korea’s capital accumulation, although it lost its momentum by a large margin after the crisis, was also not low compared to those of other nations. Korea’s relative position in total factor productivity increase rate rose in 2001-2004 to 14th place out of 83 countries from 20th in the ‘90s.
Efforts for higher productivity are essential for the Korean economy to get back on track, and future capital accumulation should be based on increased productivity. The positive pattern in Korea’s total factor productivity arguably attests to the effectiveness of a series of reforms implemented after the crisis. Considering the fact that Korea’s capital accumulation before the crisis was at an unusually high level, future policies to induce investments with higher growth potential must focus on improving market infrastructures so that capital accumulation can be achieved on the basis of higher efficiency.
경제위기 이후 한국경제의 성장 둔화에 대한 실증적 평가(Empirical review of Korea’s economic slowdown after the crisis in the late ‘90s)
|Series Title; No||정책포럼 / 제 201호|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Macroeconomics|
|Holding||한국개발연구원; KDI 국제정책대학원|