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Republic of Korea

The Macroeconomic Conditions of South Korea

Daysha Jones ID: 0832287

1. Introduction
The purpose of this report is to present the macroeconomic conditions of South Korea (formally known as the Republic of Korea). The country is part of the Organization for Economic Co-operation and Development (OECD). Relevant information and data have been retrieved from multiple reliable sources such as the Central Intelligence Agency (CIA), the World Bank, Trading Economics, and a database known as the World Development Indicators (WDI). Moreover, other resources have been utilized to more fully illustrate the economic conditions of South Korea. Further, the following research will identify critical macroeconomic indicators in relation to Keynesian Theory. Due to the fact that this report is based on Keynesian Theory, limitations will be presented to assist in understanding the validity of ideas and concepts discussed.

2. Background of South Korea

2.1. Economy

South Korea was ranked as the 15th largest economy in the world (New York Times, 2011). It was also reported the 4th largest economy in Asia (BBC News, 2011). The GDP was last recorded at approximately $1.554 trillion (South Korea Government, 2012).The country has come a long way from the 1960s when its GDP was comparable to the poorer countries of Africa and Asia (CIA, 2012). Further, South Korea was forced to take a hefty bailout package of $60 billion from the International Monetary Fund (IMF) in order to withstand the economic collapse due to the Asian Currency Crisis, also known as the IMF crisis of 1997-1998. Consequently, big banks faced closure, as well as industrial companies, which led to the redundancy of citizens and donation of gold from citizens to the National Treasury. Among the surviving companies, was Samsung Electronics which subsequently attained less debt and healthier balance sheets (REFERENCE). Despite the economic strain, South Korea was able to adapt and is now among the worlds wealthiest nations. Furthermore, the country took on major reforms as a result of the Asian Crisis.

During this time, GDP was 6.9% in 1998, and recovered by 9% in 1999-2000 (CIA, 2012). South Korea opened its economy to more foreign investment and imports. Further, the economy grew between 2003 and 2007 with an economic decline in 2008. From an annual growth rate of 4-5% between 2003 and 2007, the GDP growth slowed to .02% in 2009. According to the Central Intelligence Agency, recovery was then achieved due to export growth, low interest rates, expansionary fiscal policy, and growth was estimated to be 3.9% in 2011. The economic challenges faced by South Korea would entail the vastly aging population, inflexible labor market, and heavy reliance on exports which account for half of GDP (CIA, 2012).