By Matija Šerić
During the Fourth Republic (1972–1981), South Korea experienced a strong industrial boom, channeling investments into the chemical industry through an import substitution strategy that promoted domestic production. The authorities gradually improved workers’ rights and increased wages, while the state simultaneously encouraged the development of heavy industry, accelerating the growth of the steel and electronics sectors. Most of the heavy industry was concentrated in the southern part of the country, while the Seoul area alone accounted for one-quarter of total industrial output in 1978. Nevertheless, during the 1970s, the income gap between the agricultural and industrial populations became increasingly pronounced.
In 1979, the country was shaken by the assassination of President Park Chung-hee, marking the beginning of a period of political instability under his successor, Choi Kyu-hah. Tensions escalated, and later that year Park’s close associate Chun Doo-hwan seized power in a military coup, pushing the Fourth Republic into a new and turbulent phase of its history.
The Fifth Republic
The Fifth Republic (1981–1987) began with the rise to power of General Chun Doo-hwan, who carried out a coup d’état in 1980, established military rule, and introduced a new constitution. During the 1980s, his government pursued conservative monetary policy and strict fiscal measures to curb inflation. The money supply was cut in half, and the national budget temporarily frozen – an unprecedented move in the country’s economic history. At the same time, state intervention in the economy decreased, and restrictions on imports and foreign investment were relaxed, stimulating competitiveness and market openness.
To reduce disparities between rural and urban areas, Chun’s regime increased investment in infrastructure in the early 1980s – building roads, modernizing transportation routes, and improving agricultural mechanization. These reforms, combined with the recovery of the global economy, led to a new wave of economic growth in the second half of the decade. Between 1982 and 1987, South Korea’s growth rate averaged 9.2%, and between 1986 and 1988, an impressive 12.5%. From 1963 to 1990, the country’s average GDP growth rate was 10%, confirming its status as one of Asia’s most remarkable economic success stories.
19 Formulas for Rapid Economic Growth
During its rapid economic rise and accelerated convergence with the developed world, South Korea implemented at least 19 key forms of state intervention aimed at boosting its export-oriented economy. The government systematically designed policies that created favorable conditions for producers and exporters – from currency devaluation and preferential access to imported intermediate goods for export production, to strict controls that prevented abuse of the system. Strategic industries received special protection, and a range of fiscal and tax measures – including tax breaks, exemptions from indirect taxes, and reduced taxes on export income – further enhanced competitiveness.
The state supported exporters through accelerated depreciation, direct subsidies, and favorable loans, while certain companies were granted monopoly rights in industries where they had achieved early export success. Systems of insurance and guarantees for export credits were established, along with free trade zones that attracted foreign partners. Through public enterprises, the government often took the lead in developing new sectors and actively promoted South Korean exports worldwide. At the same time, emphasis was placed on technological progress, the licensing of foreign technologies under state supervision, and the setting of clear export targets for companies. This carefully coordinated mosaic of economic measures became the foundation of South Korea’s economic miracle.
Three Secrets To South Korean Economic Miracle
Chaebols
The chaebols – massive business conglomerates often run by families – played a crucial role in South Korea’s industrial transformation. The government carefully selected them from among the most successful exporters, granting them various subsidies, privileges, and incentives to accelerate national economic development. Each of these conglomerates had its roots in family entrepreneurship, and it was precisely this combination of private initiative and state support that created the foundation of South Korea’s economic miracle.
The ten largest family-run chaebols accounted for as much as 60% of total national growth during the period of intense industrialization in the latter half of the 20th century. Among them, global giants such as Samsung, Hyundai, and LG stand out – symbols of success and resilience that grew out of a national vision of development and became world-renowned brands.
The Sixth Republic and the 1997 Asian Financial Crisis
With the introduction of the Sixth Republic in 1987 and the process of democratization, South Korea entered a new chapter in its development. During the first half of the 1990s, the economy continued to advance steadily, supported by both public and private investment. However, the end of the decade brought a serious challenge – the Asian Financial Crisis of 1997. As Asian currencies began to lose value rapidly, the South Korean won also suffered a dramatic depreciation. In an effort to stabilize the situation, the International Monetary Fund approved an emergency loan of $21 billion as part of a larger $58.4 billion aid package.
Thanks to decisive government measures, labor market adjustments, and new sources of financing, the country managed to overcome the crisis. By the end of 1999, GDP had risen by an impressive 10.5%, allowing President Kim Dae-jung to officially declare the end of the won crisis. His reforms, which shifted the economy from state capitalism to a market-oriented model, encouraged sustainable growth – 9.2% in 2000 and 3.3% in 2001, even as the global economy slowed.
South Korea continued its upward trajectory until the 2008 global financial crisis, which temporarily affected industrial output, consumer spending, and exports of automobiles and semiconductors. However, thanks to decisive state intervention and domestic demand stimulus, the country avoided a severe recession. By 2010, South Korea’s GDP had again grown strongly – by 6.1%, reaffirming the resilience and strength of one of the world’s most dynamic economies.
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South Koreans Now Earn About 20 Times More Than Their Northern Counterparts
In 1960, both North and South Korea shared the same fate of poverty, ranking among the poorest countries in Asia and Africa. But over the following decades, South Korea underwent a remarkable transformation – from a war-torn nation to one of the world’s most advanced economies. Today, more than half a century later, its per capita income is estimated to be twenty times higher than that of North Korea.
Measured by purchasing power parity (PPP), South Korea’s GDP per capita reaches around USD 65,000 per year – higher than in Italy or Spain. This is a stunning achievement considering that in the 1970s South Koreans earned only one-tenth of the American income level, while today they reach about 70% of the U.S. standard.
As of 2025, South Korea’s economy rests on several strong sectors that define its global success: electronics and telecommunications, shipbuilding, the automotive industry, construction, weapons and defense production, tourism, and mining. Each of these sectors reflects the hard work, innovation, and vision of a people who built one of the most dynamic economies of the 21st century with their own hands.
Services account for 58% of GDP, industry for 32%, and agriculture for 2%. According to 2025 estimates, South Korea’s nominal GDP stands at USD 1.8 trillion, ranking 13th in the world and 4th in Asia. In terms of PPP, GDP amounts to USD 3.3 trillion – 14th in the world and 5th in Asia.
In 2024, nominal GDP grew by 2%. Inflation this autumn stands at around 2%, and unemployment at about 2.6% – impressive figures. Around 15% of the population lives below the poverty line, and public debt amounts to about 47% of GDP. Exports in 2021 totaled USD 683 billion, while imports reached USD 632 billion. The main export partners are China (22.5%), the United States (18.7%), ASEAN countries (16.7%), and the European Union (10%). On the import side, the main partners are China (22.5%), ASEAN countries (12.5%), the United States (11.4%), the European Union (10.3%), and Japan (7.6%).
References:
https://wearetop10.com/wealthiest-cities-of-the-world-by-gdp/
http://www.heritage.org/index/country/southkorea
https://www.cia.gov/library/publications/the-world-factbook/geos/ks.html
https://www.weforum.org/agenda/2015/01/how-south-korea-can-sustain-strong-growth/
http://countrystudies.us/south-korea/45.htm
http://www.washingtontimes.com/news/2017/may/8/south-korea-has-undergone-an-economic-miracle/
https://www.nytimes.com/2017/05/12/world/asia/south-korea-economy-moon-jae-in.html
