Korea to Fall Behind Taiwan in GDP Per Capita After 22 Years

A turning point in a two country rivalry

For the first time in 22 years, Taiwan is poised to overtake South Korea in gross domestic product per capita. Based on the latest official figures and projections, Taiwan’s GDP per person in 2025 is expected to reach about 38,066 dollars, compared with South Korea’s projected 37,430 dollars. The shift carries weight beyond a headline number. It reflects divergent growth paths, a powerful upcycle in Taiwan’s technology exports, and currency dynamics that have tilted in Taiwan’s favor while weighing on Korea’s dollar denominated metrics.

The momentum behind Taiwan’s rise is visible in trade and output data. Taiwan’s exports surged 34.1 percent year over year in August to 58.5 billion dollars, edging past South Korea’s 58.4 billion dollars, which rose 1.3 percent. Taiwan’s real GDP expanded by 8.01 percent year over year in the second quarter, its fastest pace since 2021, supported by a global buildout of advanced computing and artificial intelligence infrastructure. In contrast, Korea’s economy grew 0.6 percent on a year over year basis in the same quarter, reflecting a slower external environment and a more subdued rebound in domestic demand.

This year marks a reversal of a long period in which Korea held the upper hand. Korea first overtook Taiwan on a consistent basis in 2003 and even widened the gap close to 10,000 dollars around 2018. As recently as 2023, Korea posted 35,129 dollars against Taiwan’s 33,437 dollars. The tables now appear to be turning as Taiwan’s chip centered economy benefits from the AI server boom while Korea contends with softer manufacturing growth and a weaker currency.

What the numbers show and how they are computed

GDP per capita measures the value of goods and services produced in an economy divided by its population. The headline figures in this story are expressed in current US dollars. That choice matters. Current dollar comparisons move with exchange rates. A depreciation of the Korean won reduces Korea’s GDP per person when converted into dollars, even if output in local currency is steady. Purchasing power parity statistics tell a different story, but policymakers and markets often track current dollar numbers for financial and trade analysis.

South Korea’s 2025 estimate of about 37,430 dollars reflects an official nominal growth assumption applied to last year’s economy, then divided by the projected population. The government’s nominal growth rate of 3.2 percent on last year’s GDP yields roughly 1.93 trillion dollars for 2025, spread across about 51.69 million people. Taiwan’s projection of about 38,066 dollars is based on its statistics agency’s latest growth update and population figures following a significant mid year upgrade to growth expectations.

International institutions also publish forecasts, which can differ because of timing and exchange rate paths. Earlier this year, the International Monetary Fund presented a narrower gap between the two economies, and at one point projected Korea still slightly ahead in 2025. Since then, Taiwan’s growth outlook was raised, semiconductor exports accelerated, and the won weakened relative to the US dollar and the New Taiwan dollar. These shifts help explain why recent official domestic projections show Taiwan edging ahead in 2025 and, on current trajectories, opening a gap into 2026.

Taiwan’s semiconductor surge and AI tailwinds

Taiwan sits at the center of the global semiconductor supply chain. Taiwan Semiconductor Manufacturing Company produces the most advanced manufacturing processes in commercial use, and the island’s ecosystem of suppliers builds key components for AI servers, advanced packaging, and memory controller chips. The scramble by technology companies to secure compute capacity has translated into a jump in orders for logic chips, high bandwidth memory modules, and AI server platforms. That demand has rippled into capital expenditure, logistics, and high value service activity that lift GDP.

Global technology companies are deepening their footprint in Taiwan. Nvidia has planned a research and development center in Taipei with about 1,000 engineers. AMD has announced an AI and silicon photonics research facility worth roughly 263 million dollars. Amazon intends to invest billions in data infrastructure over 15 years. TSMC is building a two nanometer fabrication plant in Kaohsiung, adding thousands of jobs. Rising pay in the tech sector is supporting consumption and real estate activity, even as other sectors adapt more slowly.

The export data underscore the scale of the shift. A double digit year over year rise in shipments, concentrated in semiconductors and electronics, has lifted overall revenues and fiscal receipts. The New Taiwan dollar has also been less weak than the Korean won against the US dollar, which supports Taiwan’s dollar denominated GDP readings.

Currency and the exchange rate effect

Exchange rates play a quiet but powerful role in current dollar metrics. A weaker Korean won pushes down the dollar value of Korean output and incomes while raising the cost of imports, including energy and intermediate goods. The New Taiwan dollar’s relative resilience has the opposite effect. Taiwan’s central place in the AI supply chain also encourages capital inflows, which can stabilize its currency during upswings, although that effect can reverse during down cycles.

South Korea’s slowdown and structural tests

South Korea is growing, but more slowly than earlier in the decade. Real GDP rose 0.6 percent year over year in the second quarter, and the government cut its 2025 growth projection to 0.9 percent. The central bank sees growth near the mid 1 percent range in 2026. Trade has been hit by softer global demand in some industrial segments, and by new uncertainty over tariff measures announced by the United States in August. Consumption has stabilized but lacks strong momentum, and investment outside a few high tech areas has been patchy.

The per capita milestone of 40,000 dollars is now projected to arrive later for Korea than previously expected. Based on current assumptions, Korea would reach about 38,947 dollars in 2026, while Taiwan could top 41,019 dollars the same year. Those figures are forecasts, so they will move with growth, inflation, and the exchange rate, yet the direction points to Taiwan remaining ahead unless the drivers change materially.

Economists in Seoul point to currency weakness, slow productivity gains in services, and delayed industrial restructuring as headwinds that are holding back dollar denominated incomes. Kim Jung sik, professor emeritus of economics at Yonsei University, framed the currency and competitiveness challenge in stark terms.

The weakness of the won reflects a weakening of South Korea’s industrial competitiveness. Without painful reforms such as fostering new industries and improving the labor market, it will be difficult to escape the trap of low growth.

Others stress the need to upgrade into higher value activities across manufacturing and services. Kim Kwangseok, head of economic research at the Korea Economic and Industrial Research Institute, has argued for a faster shift into high value industries to lift potential growth and incomes. As he put it:

It is urgent to overhaul industrial strategies to narrow the gap with Taiwan.

Do higher averages mean higher incomes

GDP per capita is an average. It does not describe how prosperity is distributed across households or regions. Wage and salary data tell a more nuanced story. South Korea still pays higher average wages than Taiwan and has a higher statutory minimum wage. Taiwan’s faster recent growth is concentrated in semiconductors and linked electronics. Many service sector jobs and small manufacturers have seen more modest pay gains. The cost of living also differs. Housing and daily expenses in Seoul are generally higher than in major Taiwanese cities, which influences how far a paycheck goes.

That concentration can make the boom feel uneven within Taiwan. While engineers and technicians in chip and server companies have seen rapid gains, other sectors often lag behind inflation. Taiwan’s government has pointed to efforts to spread growth more widely through social investment and workforce programs. At the same time, demographics loom large. Taiwan, like Korea, faces a very low fertility rate and a shrinking working age population. Attracting foreign talent has been a challenge. Growth in foreign white collar workers over the past year has been small, despite the electronics boom, which complicates efforts to fill advanced roles quickly.

Korean households face a different mix of pressures. Wages are higher on average, yet slow growth and currency weakness have lifted imported costs for energy and food. That squeeze limits consumption and can blunt the impact of export recoveries. These differences are why similar per capita figures can feel very different on the ground in terms of daily life.

Outlook to 2026 and regional context

Looking ahead, official projections put Taiwan on course to extend its lead in per capita GDP in 2026, helped by continued semiconductor demand and solid overall growth near the mid 3 percent range. Korea’s forecast is more subdued, with growth near the upper 1 percent range and a slower approach to the 40,000 dollar mark. The gap could widen if the AI investment cycle remains strong and if the won stays weak. A stronger won, firmer consumer demand, or a quicker shift into high value services and advanced manufacturing could narrow the difference.

Japan and the region

The ranking shifts come within a broader regional reshuffle. Korea surpassed Japan in per capita GDP in 2022, aided by the yen’s weakness. Taiwan has been catching up with Japan and has been projected to surpass it on some measures. Currency trends are central to these comparisons. So are sectoral specializations, with Taiwan’s strength in cutting edge logic chips and Korea’s depth in memory, displays, autos, and ships. East Asia’s wealth map is becoming more sensitive to exchange rates, technology cycles, and trade policy changes.

Policy choices that could reshape trajectories

For South Korea, the path to higher incomes runs through productivity and new growth engines. Steps that economists highlight include raising service sector productivity with digital tools and competition, easing regulatory bottlenecks for investment, improving the match between university training and industry needs, and deepening capital markets for startups and scale ups. Trade diversification can reduce exposure to tariff risk in key markets. Upgrading into design, software, power electronics, and system integration can complement Korea’s leadership in memory chips and help capture more of the AI value chain.

Taiwan’s challenge is different. The island is thriving at the leading edge of semiconductors, yet long term resilience will benefit from broader wage growth, energy reliability for power hungry fabs, and continued investment in skills. Attracting and retaining international talent can offset labor shortages as the population ages. Diversifying income beyond semiconductors, through advanced machinery, green technologies, software, and higher value services, can make growth more balanced across regions and industries.

Several variables will determine how the Korea Taiwan comparison evolves over the next two to three years. Close watchers will track the following:

• Exchange rates for the won and the New Taiwan dollar against the US dollar
• Global demand for AI servers, advanced chips, and cloud infrastructure
• US trade policy and any tariff changes that affect Asia’s exporters
• Domestic investment in power generation and grid stability for energy intensive industries
• Labor market reforms, immigration policy, and workforce participation
• Progress in moving up the value chain in both manufacturing and services

At a Glance

• Taiwan’s GDP per capita is projected at about 38,066 dollars in 2025, ahead of Korea’s roughly 37,430 dollars
• In 2023, Korea stood at 35,129 dollars and Taiwan at 33,437 dollars, showing how quickly the gap has closed
• Taiwan’s exports rose 34.1 percent year over year in August to 58.5 billion dollars, slightly above Korea’s 58.4 billion dollars
• Taiwan’s real GDP grew 8.01 percent year over year in the second quarter, while Korea grew 0.6 percent
• Exchange rates have been a key swing factor, with the Korean won weaker than the New Taiwan dollar
• Official forecasts for 2026 put Taiwan near 41,019 dollars and Korea near 38,947 dollars in GDP per person
• US tariff measures announced in August are a risk for Korean exports, while AI related demand supports Taiwan
• Economists in Korea call for faster industrial upgrading and labor market improvements to lift growth and incomes