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South Korea's Black Market Equivalent To 8 Percent Of GDP In 2015

By February 17, 2017 at 6:07 am
The underground economy refers to illegal economic activities like smuggling and untaxed trading. (Photo : Korea Portal)

A state-run think tank said Friday that South Korea's underground economy, which is not included in the official data of the country's gross domestic product (GDP), accounted for 8 percent of the actual GDP in 2015 despite the measures by the government to clamp down on the shadow economy.

South Korea's black market was estimated to be worth 124.7 trillion won as of 2015, equivalent to 8 percent of the size of the country's GDP worth 1,558.6 trillion won, according to the latest report of The Korea Institute of Public Finance (KIPF).

The proportion for 2015 slightly fell from the 8.7 percent rate in 2013, the KIPF report showed. Compared to Austrian Friedrich Schneider's 2010 estimate of 24.7 percent of GDP, the figure is way lower.

Last year, Kim Jong-hee, a professor of Economics at Chonbuk National University, released a study showing that the size of South Korea's underground economy is estimated at 161 trillion won or equivalent to 10 percent of GDP. 

The study, based from data from the 26 member countries of the Organization for Economic Cooperation and Development (OECD) from 1995 to 2014, showed that the size of the country's underground economy in relation to the official GDP is much higher than the average in OECD countries.

The scale of South Korea's shadow economy surpasses that of G7 countries' average of 6.65 percent and the other 18 members' average of 8.06 percent.

Kim's paper also suggested that the amount of tax evasion in South Korea, which was at 3.72 percent, was higher compared to 2.21 percent for the highly advanced economies and 3.06 percent for the rest of the OECD during the period.

The underground economy refers to illegal economic activities like smuggling and untaxed trading. As part of the South Korean government's plan to fund welfare costs, it has tried to legalize the underground economy.

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