South Korea ranked 11th worldwide in gross domestic product in 2015, with its global standing rising two notches from a year earlier, data showed Tuesday.
According to the data by the World Bank, South Korea’s nominal GDP came to $1.38 trillion last year, up from 13th place a year earlier. But the value was down 2.4% from $1.42 trillion the previous year, Yonhap quoted a World Bank report as saying.
It is the first time in nine years that South Korea has regained its 11th place in the global GDP rankings. Seoul’s standing tumbled to 15th in 2008 amid the global financial crisis.
South Korea’s advance was attributed mainly to lackluster performances by rival economies, such as Russia and Australia, which were hit by plunging commodity prices.
Russia’s GDP nose-dived 34.7% on-year to $1.33 trillion in 2015, with the Australian economy shrinking 7.9% to $1.34 trillion.
The report ranked the United States in first place, followed by China, Japan, Germany, United Kingdom, France, India, Italy, Brazil and Canada respectively from second to tenth.
“It is difficult to attach great importance to the rise in South Korea’s ranking, but South Korea showed a relatively good performance though the global economy was stuck in sluggish growth and low prices,” said Park Sang-hyun, an analyst at Hi Investment & Securities Co.
Meanwhile, the data also showed South Korea’s per-capita gross national income came in at $27,440 last year, or 46th worldwide, which was down four notches from the previous year.
South Korea’s per-capita GNI in terms of purchasing power parity stood at $34,700 with its ranking slipping six spots to 48th, according to the data.
54th Consecutive Trade Surplus
A sharp decline in imports managed to outpace a fall in exports, as lessened demand at home and abroad saw South Korea post its 54th consecutive trade surplus in July, customs data showed on Aug. 16.
The country’s trade surplus came to $7.6 billion last month, plunging from a record $11.4 billion in the previous month, according to the data from Korea Customs Service.
The figure also marked a 7.8% on-year rise from $7.05 billion tallied in the same month a year earlier, extending its bullish streak to 54 straight months since February 2012.
The consecutive monthly trade surplus came as a protracted economic slowdown dragged down imports at a faster pace than exports.
Exports fell 10.3% on-year to $41 billion last month, while imports retreated 13.6% to $33.4 billion.
Rethinking Household Debt Strategy
The South Korean government should no longer use household debt as a means to boost sagging domestic demand as record high debt could throw the Korean economy into another crisis if it is hit by external shocks.
The country may face a debt debacle similar to the one the US experienced in 2008 unless the government changes its debt strategy, a noted global economist said.
“Household debt (in Korea) is high and rising faster than income,” independent economist Andy Xie told The Korea Times. Xie, a former economist at Morgan Stanley Asia, is well known for his prediction of the 1997-1998 Asian financial crisis.
“Household debt shows that there is insufficient income to cover living costs,” he added. “This is very similar to the situation in the US before 2008.”
Xie said that a debt crisis can materialize if the global economy suffers a further slowdown.
“If there is a crisis, it will start with exports plunging. If the global economy tumbles, for example, and China goes into a hard landing, it would lead to an employment crisis and then an even worse debt crisis,” he said.
The nation’s overall household debt reached a record high of 1,224 trillion won at the end of March, up more than 10% from a year ago, according to the Bank of Korea. It is equivalent to around 160% of household incomes.
In particular, Korea’s household debt grew the fastest among emerging economies in 2015 with its debt-to-GDP ratio reaching 88.4%, the highest among 18 emerging economies surveyed.
