Today’s Hankyoreh has an article on Korea’s economic progress as monitored by the OECD.
It focuses on the highest Gross National Incomes (GNI) and Gross Domestic Products (GDP) list.
According to figures released August 28, as of 2005 South Korea was the world’s 12th largest economy in terms of gross domestic product (GDP) and the world’s 29th in terms of per capita gross national income (GNI). The value of South Korean exports and imports were ranked the world’s 12th and 13th each, and inflation was lower than other Organization of Economic Cooperation and Development member countries.
The Korean & Other International media often uses economic stats like the above as definitive indicators about how a country is doing. However, as this report shows the information often needs to be cross referenced and analysed to see the real picture.
Take Luxembourg’s GDP per head. It has been at the top of the OECD rankings for several years now, well ahead of other countries, including the US. To explain the large lead, statisticians point to the 90,000-strong labour force commuting across the border everyday from Germany, France, Belgium and the Netherlands, often to work in lucrative financial services. These workers are not counted as part of Luxembourg’s population of 450,000. If they were added to this number, then overall GDP per head would be smaller, though still among the highest in the OECD.
For comparing income between countries, purchasing power differences must be taken into account. After all, as anyone that travels knows, $100 in one country can go a lot further than the same $100 in another. Consider Japan’s GDP per head, which in current market dollars at normal exchange rates lies comfortably inside the top ten in the OECD area. But when purchasing power parities (PPPs) are applied, Japan’s GDP per head slides back to 16th.
Ireland is another country where GDP has to be read with care. Ireland’s position has risen up the GDP per head rankings since 1999, and is now in the top five countries in the OECD. This remarkable transformation has been put down to a mix of factors, of which inward investment in high value-added businesses is one. But does GDP per head accurately reflects Ireland’s actual wealth, since all that inward investment (and foreign labour) generates profits and other revenues, some of which inevitably flows back to the countries of origin?
We can see Korea comes in around 13th or 14th for GDP (PPP) and 46th for GNI (PPP). This is because of the relatively high cost of living in Korea when compared to other countries.