Korea’s Income to Overtake Japan, France, Moody’s Says – Real Time Economics

A South Korean banker holds Korean won bank notes at the Korea Exchange bank.
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Moody’s Investors Service predicts Korea will likely surpass Japan and France by one measure of personal income in the next four years, as part of its “breakout” growth trend.

In a report Monday, the ratings firm notes that Korea, Asia’s fourth-largest economy, has exceeded the median average annual growth of 32 countries with per-capita income of $30,000 or more in purchasing power parity terms in the past five years — and will likely continue to do so.

Moody’s expects South Korea’s per-capita income to jump to $38,451 in 2018 from $31,950 in 2012 in PPP terms. Japan is expected to rise to $37,826 and France to $37,647 over the same period.

PPP measures a currency’s actual purchasing power after adjustments are made for the differing costs of goods and services across countries. Since goods and services are generally cheaper in South Korea than in Japan, South Korea gets a boost when the two economies are compared in PPP terms.

“Looking out over the next four years, Korea will likely remain on a relatively robust growth path, and it will continue to close the gap in living standards with the mature and advanced economies,” Moody’s said.

The ratings firm notes risks to the Korean economy such as high levels of household debt, but predicted appropriate policy measures would ensure continued solid growth.

“Success will require progress on all fronts,” Moody’s said.

In February, South Korean President Park Geun-hye announced a policy plan that includes raising per capita income—not in PPP terms but in actual exchange-rate terms — to $40,000. By that measure, individual income was around $26,000 as of 2013, according to the Bank of Korea.

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9 June 2014 | 9:38 am – Source: blogs.wsj.com

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