INTRODUCTION : South Korea

South Korea has unique geographical location, and this geographical

characteristic plays a key role in developing South Korea economy because the
country is surrounded by Japan, Russia and China which has the worlds strongest
economic power.
Over the past four decades, Republic of Korea has incredibly developed and
become a high technological economy. Actually, just after the Korean War, GDP per
capita of South Korea was almost as same as the poor countries such as Africa and
other developing countries in Asia. Whats more, South Korea has suffered from the
serious financial crisis in 1997 to 1998. In 2000s, however, South Korea surprisingly
overcame the difficulties in short period of time, and even South Korea became the
trillion-dollar club of world economies as well as they joined Organization for
Economic Cooperation and Development (OECD).
A case of this incredible development of South Korea economy is beyond example
all over the world, and it is called Miracle on the Han River. Finally, their economy is
currently one of the strongest in Asia as well as in the world, even the South Korea is
currently ranked 12th worlds largest economy.

PRODUCT OUTPUT PERFORMANCE ANALYSIS

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1) GROSS DOMESTIC PRODUCT (GDP)

The GDP is the market value of every products and services which are produced
in a country. The market value in South Korea has highly increased every year, even
if there was huge contraction from 2008 to 2009. In 2014, the South Koreas GDP
was recorded at 1410.38 billion US dollars. The Gross Domestic Product value of
South Korea represents 2.27 percent of the world economy. Between 1960 and
2014, the average amount of South Koreas GDP was 369.07 USD Billion, and the
highest was 1410.38 USD Billion in 2014, whereas the lowest record was 2.36 USD
Billion in 1961. Today, there are more various markets such as manufacturing,
electronics, and K-Culture contributing the GDP of South Korea to be increased.

2) GDP GROWTH RATE

(source:www.tradingeconomics.com l The Bank of Korea)

The chart above illustrates GDP growth rate from 2002 to 2015, and it is showing
the changes of GDP figures from year to year. The trends of South Korea GDP
growth rate is fluctuated over the decade. The Gross Domestic Product in South
Korea is currently ranked in 11th in the world, and the growth rate has been quite
stable since 2002, although there was sharp decrease in 2008 to 2009. The highest
value was in 2009 at 3.8%, whereas the lowest value was -4.1% in 2009.
According to the graph above, there was recession in 2003 just after the FIFA
World Cup which is held by South Korea & Japan in 2002. Demand in goods and
services were decreased because the South Korea government spent too much
budgets to hold the FIFA World Cup as well as people spent too much money to
celebrate World Cup events in 2002.
Furthermore, there was big contraction in 2008 to 2009 because of US financial
crisis. The Gross Domestic Product in South Korea has gradually increased after the
global financial crisis due to globalization, technical progress, ageing and low public
social spending, and the GDP growth rate has moderately maintained up to this day.

3) GDP PER CAPITA : VS North Korea

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(Source: http://gypsyscholarship.blogspot.sg l Horace Jeffery Hodges)

In 2014, South Koreas GDP per capita was recorded at 28,338 US dollars, it is
almost same as about 200 percent of the world's average. On the other hand, The
North Korea was worth 1,200 US dollars in 2014. The figure in South Korea is almost
20 times higher than North Korea.
North Korea is world famous typical dictatorship government and least open
economies. Their freedom in business and economy is completely limited and
controlled by the president Kim Jung-Un. For this reason, the GDP per capita in
North Korea has been remaining at the same level over the few decades.
In contrast, GDP per Capita in South Korea has been increasing annually because
South Korea opens the economy to foreign investment and imports. Also, the
government promoted the improvement export. Because of the limited natural
resources, South Korea imports raw materials and makes finished goods to be
exported to overseas. Moreover, government more focuses on manufacturing
industry and the technology industry. These kinds of governments strategy have
been contributing to the South Korea GDP per capita increasing.
4) GOVERNMENTS MEASURES

Even though South Korea has gone through two critical financial crises in 1997
and 2008, today the South Korea economy is moderate and stable. To make this
result, there were some governments measures that made South Korea overcome
past crises.
To begin with, the quality of governance was an important factor in developing
South Korea economy. In South Korea, the government more focused on good
quality of governance including stable political environment and lack of violence to
stimulate the economic development. With this measure every firm in South Korea
was able to be grown as they jump into unlimited competition.
In addition to, when there was sudden contraction in 2011, the government made
US-Korea Free Trade Agreement for profitably in importing foreign goods and
services each country, and it directly affected South Korea economy in March 2012.
Finally, the South Korea government has invested in the technology which is a
primary factor in encouraging the economic growth. More job opportunities and more
various industries were created and the economy became more productive with the
rapidly developed technology.

LABOUR MARKET ANALYSIS

1) 3 DIFFERENT UNEMPLOYMENT TYPES
Structural, frictional, and cyclical unemployment are the three major types of
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unemployment. These three different types of unemployment have been easily found
in South Korea economy.
To begin with, Frictional Unemployment is always present in South Korea
economy. Today, actually people are not willing to work in the same organization for
a long time, and they want to transfer to other new opportunities or overseas to build
a resume. Frictional Unemployment is occurred when the unemployed workers are
not willing to take the first job offer due to unsatisfied wages and necessary skills. A
good example of Frictional Unemployment in South Korea today is the college
students quite their part time job to prepare finding a job in their field after
graduation.
There is another category of unemployment in South Korea which is Structural
Unemployment. Structural Unemployment is based on dynamic changes in the
economy and the social needs of the. As the South Korea is the small single race
country, lesser factors cause Structural Unemployment than other multi race
countries. One of the main reasons of Structural Unemployment in South Korea is
because of technology. Since the technology in South Korea has been highly
developed, many previous skills become obsolete. For instance, employees who
worked on cotton fields which were one of major industry before 2000s have been
replaced by highly efficient machine which is more productive comparing with
manual industry.
Finally, we also can find Cyclical Unemployment in South Korea economy. The
economy has the capacity to create job opportunities which directly lead to the
economic development. Hence, an expanding economy normally has lower levels of
unemployment, whereas during the recession faces there is higher level of
unemployment. During financial crisis in South Korea, there were more unemployed
workers than job openings because of the economic depression, and this is an
example of Cyclical Unemployment.
2) DESCRIBE UNEMPLOYMENT TRENDS

Unemployment Rate between 2004 and 2015

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(source:www.tradingeconomic.com)

Youth Unemployment Rate from 2004 to 2015

(source:www.tradingeconomic.com)

Even if unemployment figure in South Korea has been maintained below 5 % over
the 10 years, the youth unemployment rate is recently hitting a high of 10 per cent.
South Korea young people are having such a hard time to find a job.
The highest unemployment rate was in 2010 after financial crisis in 2008 at nearly
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5%. The reason why unemployment rate dramatically increased is because of the
economic trend. Firms started to hire more irregular workers than regular workers to
prevent unexpected financial crisis that they have gone through in 2008.
After 2010, the unemployment rate has become quite stable and levelled off below
4 percent since the government is pushing to create more job opportunities,
especially among women and the youth, as part of its efforts to ensure a recovery in
domestic demand.

3) GOVERNMENT MEASURES TO ACHIEVE FULL EMPLOYMENT

The unemployment rate in South Korea is always a major concern. Whenever
unemployment rate rose, the South Korea government announced some strategies
for economic innovation. including increasing employment to 70%. South Korea
government put their effort to increase the employment especially for women and
youth. Moreover, the government tried to create more job opportunities by increasing
the irregular employment as well as the part time jobs, as and the government is
going to create more than 930,000 part time jobs by 2017. As a result, females could
return to work after giving birth as well as retired professionals were able to start a
new life with their valuable experience and expertise in field. Moreover, actually the
South Korea government freely supports the companies to hold annual career fair to
make many jobless people participate in.

PRICE LEVEL ANALYSIS

1) DESCRIBE THE INFLATION TREND

(source: www.tradingeconomics.com l Statistic Korea)

The chard above demonstrates the inflation trends from 2004 to 2015. This inflation
trend has been fluctuating over the ten years. The inflation rate was low from 2006 to
2008, and then the figure rose again till around 2009 due to global financial crisis.
After financial crisis, the inflation rate rapidly decreased again, and it was recovered
to around 4.5 percent in 2011. Recently, the inflation rate became stable, as the
figure has levelled at below 2%. For the past ten years, the highest inflation level
was in around 2009 at almost 9%, whereas the lowest rate was in 2015 at lower than
1%.

2) CAUSES OF INFLATION
Cost-Push Inflation, Demand-Pull Inflation and Over Expansion of the money
supply are three major factors causing inflation. To begin with, Demand-pull inflation
which is the most common phenomenon occurs when demand for the products or
services increases and overtakes supply. As GDP per capita in South Korea has
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been increasing, people are spending more money to purchase goods and services.
In this process, today the prices of goods and services are increasing to modify
equilibrium, and this circumstance lead to Demand-Pull Inflation.

On the other hand, Cost-Push Inflation is not common and it is quite unlike
Demand-Pull Inflation. Cost-Push Inflation temporarily occurs when there is a
shortage of supply or other external factor such as natural disasters. For instance, in
2003 the typhoon Maemi which was the strongest South Korea has ever gone
through hit the Korea peninsula and caused extreme damages. For this reason, the
Cost-Push Inflation temporarily occurred due to damaged production facilities and
increased production cost.
Finally, the last factor causing inflation is the Over-Expansion of the money supply.
Cash, credit, loans and mortgages are included in the money supply. If the money
supply rises, the value of the currency goes down. Once the monetary value goes
down comparing with the value of foreign exchanges, the costs of imported products
and services increase, and it leads to the result of creating Cost-Push Inflation.

3) GOVERNMENT MEASURES TO ACHIEVE STABLE PRICE

Korea Government showed performance for trying reducing inflation rate in 2009
when global financial crisis occurred. While the Cost-Push Inflation was the highest
percentage in 2009, South Korea government conducted some automatic fiscal
policies to decrease money supply. The government collected more taxes than
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before, so that over money supply could be relieved. Furthermore, South Korea
government has provided a subsidy program on social welfares which played a large
role in curbing domestic services prices. As a result, the demand-pull inflation has
become weak over the period.

CONCLUSION
In Conclusion, South Korea government implemented some measures to achieve
economic stability. South Korea has gone through some internal and external
difficulties but the two critical financial crises in 1997 and 2008 strongly influenced
South Korea economy. Either side of these years, GDP and inflation rate was
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sensitively changed and different type of unemployment was created in South Korea
economy.
To achieve economic performance, South Korea tried to reinforce the quality of
governance for the stable political environment and lack of violence. Also, the
government has invested more in technology for better production, and even they
made US-Korea Free Trade Agreement to stimulate GDP growth.
Unemployment problem in South Korea still remains a major concern. The
government tried to achieve full employment by providing frequent job career fairs
and increasing more part-time job opportunities for jobless people.
Finally, South Korea government conducted automatic fiscal policies to decrease
inflation. Moreover, the government provided a subsidy program on social welfares
and it led to the result of decreased inflation rate over the period.
For some years ahead, the role of South Korea government will be more
important, and economy should become stronger to be able to cope with unexpected
economic situation as well as to maintain stable economic condition.

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