South Korea's per capita GDP overtakes Taiwan's

This article was published by the Taiwan Headlines on April 6, 2006. It reports that in 2005, South Korea overtook Taiwan in per capita gross domestic product for the first time.

Economists attribute the change to a greater appreciation of the Korean currency against the U.S. dollar. Indeed, in 2005, the Korean won appreciated 11.8 percent against the U.S. dollar, while the New Taiwan dollar only rose 3.9 percent.

According to a recent report by the Bank of Korea, South Korea's economic growth rate was roughly estimated at 4 percent for 2005, slightly lower than the 4.7 percent registered in 2004. However, South Korea's per capita GDP reached US$16,291 in 2005, marking an impressive 14.8 percent increase from the previous year.

In comparison, Taiwan's per capita GDP amounted to US$15,271 in 2005, up 7 percent from the previous year.

Economists warn the government not to overlook South Korea's rapid economic growth. They point out that South Korea is a respectable competitor, with brilliant economic development and trade performance in recent years. For instance, during the 1997-98 Asian economic fiasco, South Korea's per capita GDP once dropped to US$7,400. However, since then, the country has managed to regain momentum and emerge as a new economic power. The vitality of South Korea's economic growth cannot be ignored.

In recent years, South Korea has scored enormous success in product branding, global marketing and control of key components. The country has emerged as the second largest source of Taiwan's trade deficit, after Japan.

Other economists argue that major international economic institutions tend to use purchasing power parity (PPP) to measure a country's per capita GDP. Such a measurement excludes inflation and currency fluctuation rates, and can therefore determine a country's per capita national income and general living standards more accurately. For example, according to statistics compiled by the Swiss International Institute of Management and Development, Taiwan's PPP-based per capita GDP reached US$24,676 in 2004, far higher than South Korea's US$18,686.

In 2005, Taiwan's economic growth rate was slightly higher than that of South Korea. Meanwhile, Taiwan's 2.3 percent inflation rate was lower than South Korea's 2.8 percent in that year. Based on these two factors, some economists believe that Taiwan will continue to lead South Korea in terms of PPP-based per capita GDP.