Good afternoon, everyone!
Today I am brining the news about ‘Korea’s dependency on international trade’ released by the report from KERI, Korea Economic Research Institute.
Seemingly, Korea’s economic dependency on trade has not been very good, as illustrated by the recent figures showing its trade decifits. However, I found something new and interesting by analyzing the official data by OECD. When comparing Korea to other OECD member countriers, Korea is maintaing a stable stauts in terms of its national dependency on foreign trade. Okay, let’s see the graph below which illustrates OECD member countries’ dependency on foreign trade.
In the graph above, the red line represents OECD member countries’ average ratio of economic dependency on trade, while the black one shows Korea’s. As you may already notice, Korea’s trade dependency ratio is almost similar to that of Germany. Especially, from the period between 1997 and 2000, Korea had shown a very close figure to other advancecd countries such as Germany, French, and the UK.
Since 2000, Korea has become more dependent on trade, compared to other countries like Denmark and Austria. However, the figure still shows a relatively low ratio of trade dependency proporationate to GDP.
Let’s see another graph below quantifying the economic dependecny on trade in numeric index. The OECD average economic dependency on trade is 107.3, as indicated by the red line. Korea is under the average (103.6), showing that its degree of dependency is not a concerning factor.
Despite the facts shown in the graphs above, there are negative news saying that Korea is too economically dependent on international trade, while having a relatively low level of domestic demand. Those news are warning that Korea’s economic structure is highly vulnerable to external effects from foreign trade. However, despite those news, Korea shows its strong economic position in the world. One of the examples is that Korea is ranked 11th worldwide in terms of its economic power. This means that Korea is not that vulnerable to foreign trade changes, as it is well equipped with its own economic capabilities.
Considering that the world economy as a whole is being influenced by the European economic crisis and undergoing continuing recessions, we should be continuously aware of foreign variables. At the same time, it is important for Korean economy to build up its economic sustainability, strengthen export competitiveness, and make an effort to enlarge domestic demand. With these measures, Korea will stand out economically powerful in global economy, improving its current status. The good news is that domestic policies are moving towards it, and so do FSC’s policies.