[Glocal] ‘Growth rate rebounds’ Korean economy is said to resemble Taiwan’s

Commonalities such as K-shaped polarization, concentration in semiconductors, and geoeconomic risks

The semiconductor boom must be linked to increased domestic demand and improved productivity.

(Seoul = Yonhap News) Senior Reporter Han Seung-ho = In its latest world economic outlook, the International Monetary Fund (IMF) predicted that Korea's potential growth rate will increase from 1.94% last year to 2.14% this year and 2.20% next year. It is also predicted that Korea's per capita gross domestic product (GDP) this year will far exceed $40,000, which is the threshold for developed countries.

It is good to see that the potential growth rate, which had generally declined in the 2010s and fell to the 1% range in the 2020s, is rebounding to the 2% range. This is because it can be an achievement achieved in the face of structural difficulties due to population decline due to aging and low birth rates.

However, the fact that the semiconductor boom is cited as the most important factor that made this growth rate forecast possible is something that cannot be overlooked along with the worsening polarization problem. Focusing on the concentration of semiconductors, the analysis that the Korean economy is becoming more like Taiwan's than Japan's, a familiar comparison, is gaining persuasiveness.

In both Korea and Taiwan, semiconductors account for a large portion of the economy, including exports, investment, and the stock market. With the spread of artificial intelligence (AI), the demand for high-performance memory and advanced semiconductors has rapidly increased. They also play a large role in the global supply chain, led by Samsung Electronics and SK Hynix in Korea and TSMC in Taiwan.

The similarities between the two countries do not stop at semiconductors. They are deeply connected to the global economy and compete with each other in fields such as electronic components, displays, and petrochemicals. As technological competition intensifies, there are concerns about having to simultaneously manage the opportunities gained from cooperation with the United States and the risks arising from business in China.

While experiencing K-shaped growth, a common concern is that the decline in the working-age population and problems securing human resources may be limiting factors for growth. The geoeconomic fate of managing risks related to the North Korean nuclear issue and cross-Strait relations amid the competition for hegemony between the U.S. and China is also the same.

Korea's advantage over Taiwan is that it has fields with global competitiveness, such as automobiles, shipbuilding, and batteries, in addition to semiconductors. Taiwan's growth rate is stronger than Korea's, but it is overly dependent on semiconductors as its growth engine and is experiencing a slump in domestic demand. If the focus on semiconductors continues in Korea, it is highly likely that it will lead to significant economic volatility.

Korea's manufacturing exports, excluding semiconductors, are slowing. The effect of increased semiconductor production on employment and demand for intermediate goods is not significant. It is important to create a diffusion structure that allows semiconductor competitiveness to have a wide impact on the entire industrial ecosystem.

Above all, we must ensure that the boom in semiconductor exports leads to increased domestic demand and improved productivity. We must ensure that increased exports lead to improvements in wages, consumption, and employment through training of professional manpower, digital transformation of small and medium-sized businesses, innovation in the service industry, and fostering local industries.

It is difficult to adjust dependence on either the United States or China in a short period of time. Therefore, it is necessary to diversify export markets and production bases, stabilize the energy and core material supply chain, and maintain a stable high-tech field.

We must take advantage of opportunities for growth similar to Taiwan's and avoid falling into the 'trap of being at the threshold of a developed country.' This is a time when a firm policy will to ensure that the added value created by special semiconductors revitalizes the overall economy is more important than ever.