Battered by inflation, oil price increases and nearly a year of political disturbances, South Korea's economy has gone from boom to bust in the past 18 months. Once held up as a textbook model of progress in a developing country, the economy has sagged badly since early 1979, although officials are forecasting a modest revival next year.
During the 1970s, the South Korean gross national product grew annually at about 10 percent. This year planners predict a GNP growth of only about one percent.
Planners had acted last year to cool inflation built up during the years of fast growth but were staggered by two big oil price increases, which have meant that the country's oil bill this year will increase by a whopping $3 billion, a figure equal to 5 percent of the GNP. It has made South Korean exports too expensive and virtually every sector has suffered. The recession in the United States, its biggest buyer, also hurt.
Then came the political troubles, beginning with Park Chung Hee's assassination in October 1979, a coup within the military in December, and a period of labor and student unrest curbed by a total military crackdown in May. The GNP actually declined 4 percent in the first half of this year and a top economic planner, Kim Ki Hwan, says most of it is due to the period of unrest.
For the first time since South Korea's boom began in the late 1960s, the country faces a decline this year in per capita income.
By the end of July, with exports still suffering, the country was running a deficit in current acounts of $3 billion.
Kim said that while oil prices and inflation had hurt the most, "some of the sins were of our own doing." He referred to a round of large wage increases granted in May when labor unions for the first time engaged in widespread illegal strikes and frightened businessmen bowed to most of their demands, which ranged upward from 25 percent in wages and bonuses.
That made a ruin of the 15 percent government guidleine on wage increases. The new government, however, has warned businessmen to hold the line on wages and its edicts are apt to be observed.
Kim is encouraged for the future largely by what he sees as political stability under the strongman rule of president Chun Doo Hwan. There are no huge oil price increases on the horizon, he says, and exports will be helped by a recovery of the U.S. economy and more orders from Japan, which recently sent a trade mission to South Korea.