Shocking projections suggest that the potential growth driver of the Korean economy will fall to historically low levels next year. Unlike the short-term recovery centered on the semiconductor industry, concerns are growing that the economic structure itself is losing its growth foundation. Experts warn of a fundamental weakening of the growth engine rather than just simple economic fluctuations, emphasizing the urgent need for response measures.
According to the latest data released by the OECD, South Korea's potential growth rate is expected to decrease by 0.21 percentage points from 1.71% this year (down from 1.92% last year) to 1.57% next year. In particular, it is widely analyzed that a vicious cycle will repeat, recording 1.52% in the fourth quarter of next year and continuously breaking annual records for the lowest levels. Potential growth rate means the maximum growth rate that can be achieved without stimulating inflation; since 2012 when it was 3.63%, Korea has shown a continuous decline and entered below 2% in 2023. If this trend continues until next year, it will set a pessimistic record of a decline for about 15 consecutive years.
The growth rate gap with the United States is also widening. The gap between the two countries, which was 0.03 percentage points in 2023, is expected to expand to 0.13% in 2024, 0.28% in 2025, 0.31% this year, and 0.38 percentage points next year. The Bank of Korea has also issued a judgment in the same direction, stating that there is a high possibility that the potential growth rate will fall below 2% in 2026 and 2027. Furthermore, it has issued a warning that it could even enter the 1% range in the medium to long term, formalizing the continued decline in growth rates.
The actual economic vitality is also in a difficult situation falling below the potential level. The IMF estimates the GDP gap rate at -0.90% this year and -0.63% next year, which means that actual gross domestic product is lower than the potential level. This is a signal that the state where all production factors such as production labor, capital, and technology are not being fully utilized is becoming long-term. Concerns about the growth structure are also deepening, and the dependence on the semiconductor industry is intensifying, increasing the risks that economic fluctuations in specific industries have on the entire economy. In addition, the possibility of weakening fiscal foundations is also emerging as a major issue.
To overcome such a crisis, experts agree that the core of policy response must focus on structural reforms. It is emphasized that issues such as solving low birth rates and aging, improving productivity, and industrial diversification must be pushed forward simultaneously. Policy authorities have also formed consensus on the need for comprehensive reforms in education, housing, balanced development, youth employment, pensions, and labor. Strengthening service industry competitiveness, expanding market competition, and securing economies of scale are cited as the key conditions for reversing the potential growth rate.