Report by the WTO Secretariat

Since the Republic of Korea’s previous Trade Policy Review in 2016, relatively strong economic fundamentals and solid buffers to external shocks have helped the country maintain macroeconomic stability and ensure the resilience of its export-led economy. Korea was able to weather the COVID-19 pandemic comparatively well, supported by a comprehensive set of fiscal, monetary, financial, and other measures. During the review period, Korea’s annual GDP growth peaked at 3.2% (2017) and progressively declined to -0.9% (2020) due to the COVID-19 outbreak, a considerably milder contraction than in most other advanced economies. Annual average GDP growth rate for 2016-20 stood at 2.1%, a further decline compared to previous performances (averaging 2.9% in 2012-15 and 4.6% over 2001-11). Developments in Korea’s position among the most competitive economies in the world involved variable labour and total factor productivity (TFP) growth, but also weaknesses in areas where some reforms have been under way. Whereas headline inflation remained below target and dropped progressively to 0.5% (about a fourth of its 2017 peak level) in 2020, the unemployment rate rose slightly (4%) in 2020, reflecting weak private job creation and the impact of the pandemic.