Trade monitoring

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.

Switzerland and Liechtenstein are among the top high-per capita income countries in the world and are very well integrated into international trade. They both benefit from strong democratic institutions, educated populations, and a specialization in value-added production. Their fiscal situation is sound and their unemployment traditionally low. Services account for about three quarters of the Swiss economy. One particularity of the Liechtenstein economy is the importance of manufacturing, representing 40% of GDP in 2019. During the review period, and prior to the COVID-19 pandemic, real GDP growth in Switzerland was positive, ranging from 1.2% in 2019 to 2.9% in 2018. GDP growth in Liechtenstein tends to be more volatile because of the small size of the economy. After three years of real GDP growth, Liechtenstein’s GDP contracted by 2.3% in 2019. Because of the COVID-19 pandemic, real GDP growth fell by 2.4% in 2020 in Switzerland, and further in Liechtenstein. Thanks to strong financial buffers and a prompt response by the Governments, the pandemic is not expected to have negative effects on long-term economic prospects.