By Chung Joo-won
South Korea’s per capita gross domestic product this year may fall for the first time in six years on the weak won and lackluster growth, a private think tank said Monday.
The LG Economic Research Institute, the research arm of LG Group, estimated Korea’s per capital GDP in 2015 at $27,600, down 1.8 percent from 2014.
The think tank attributed the fall to the appreciation of the U.S. dollar against Korean won. The per capita GDP, a dollar-denominated index, decreases when the Korean currency depreciates as purchasing dollars becomes more expensive.
The average won-dollar exchange rate in the January-June period this year rose year-on-year to 1,099 won per dollar, from 1,053 won a year ago.
If the Korean won continues to depreciate against the U.S. dollar, this year will mark the first per capita fall since the 2008 global financial crisis.
The think tank also asserted that the sluggish recovery in domestic demand is hindering the nation from reaching the $30,000 mark in per capita GDP, a long-standing goal of the government.
“South Korea’s growth potential has decreased to the point where it needs structural reforms, including new growth engines to boost domestic demand,” said Lee Geun-tae, researcher at the LGERI.
The report came about three weeks after the Bank of Korea lowered the country’s annual growth forecast to 2.8 percent, from its earlier 3.1 percent, on July 9. BOK Gov. Lee Ju-yeol said the outbreak of Middle East respiratory syndrome led to a significant drop in consumer sentiment, restraining spending.
On July 24, the National Assembly passed a supplementary budget bill that would allow an additional injection of 1.6 trillion won ($1.4 billion) into the overall budget, as part of the country’s 22 trillion won fiscal stimulus package, to restore sagging domestic demand.