Place Credit Reports South Korea Order
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Economy Overview:
Since the early 1960s, South Korea has achieved an incredible record of
growth and integration into the high-tech modern world economy. Four
decades ago, GDP per capita was comparable with levels in the poorer
countries of Africa and Asia. In 2004, South Korea joined the trillion
dollar club of world economies. Today its GDP per capita is equal to the
lesser economies of the EU. This success through the late 1980s was
achieved by a system of close government/business ties, including
directed credit, import restrictions, sponsorship of specific
industries, and a strong labor effort. The government promoted the
import of raw materials and technology at the expense of consumer goods
and encouraged savings and investment over consumption. The Asian
financial crisis of 1997-99 exposed longstanding weaknesses in South
Korea's development model, including high debt/equity ratios, massive
foreign borrowing, and an undisciplined financial sector. GDP plunged by
6.9% in 1998, then recovered 9.5% in 1999 and 8.5% in 2000. Growth fell
back to 3.3% in 2001 because of the slowing global economy, falling
exports, and the perception that much-needed corporate and financial
reforms had stalled. Led by consumer spending and exports, growth in
2002 was an impressive 7%, despite anemic global growth. Between 2003
and 2005, growth moderated to about 4%. A downturn in consumer spending
was offset by rapid export growth. In 2005, the government proposed
labor reform legislation and a corporate pension scheme to help make the
labor market more flexible, and new real estate policies to cool
property speculation. Moderate inflation, low unemployment, an export
surplus, and fairly equal distribution of income characterize this solid
economy.
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