Korean economy relies heavily on advanced nations

South Korea’s dependence on major advanced economies such as the U.S. and Europe has deepened over the past decade, making its economy more vulnerable to global financial crises originating with the economic powers, a report said Wednesday.

According to the report compiled by the Korea Center for International Finance, South Korea and the U.S. had a correlation coefficient of 0.76 in terms of economic growth in the 2000-2010 period. The comparable figure was 0.51 in the 1980s and plunged to minus 0.35 in the 1990s.

South Korea also has a strong correlation with Germany, with the figure jumping to 0.71 in the past decade from 0.29 in the 1990s and 0.20 in the 1980s, the report said.

The KCIF report said that other emerging markets in Asia are also closely linked to the better advanced countries. Hong Kong had a correlation of 0.87 and 0.76 with the U.S. and Germany, respectively, over the last 10 years, and Malaysia’s corresponding figures were 0.86 with the U.S. and 0.72 with Germany during the same period.

The KCIF noted that Asian emerging countries, including South Korea, may face a slowdown in economic growth as the U.S and Europe suffer from low growth.

It added that the governments of advanced nations have no effective tools to boost their economies amid the lingering debt crisis, meaning that they may lose momentum for consumption and investment. 

(Yonhap News)