Korea's Potential Growth Rate Projected at 1.57%, Marking 15th Consecutive Year of Decline

South Korea's potential economic growth rate is expected to fall to 1.57% next year. The Organisation for Economic Co-operation and Development (OECD) estimates that Korea's potential growth rate will drop from 1.71% this year to 1.57% next year.

This marks the 15th consecutive year of decline, indicating a long-term erosion of vitality in the Korean economy. According to the OECD's latest estimates, Korea's potential growth rate has been on a downward trend since reaching 3.63% in 2012. Last year, it fell below 2% to 1.92%, and a 15th consecutive year of decline is now unavoidable if current trends continue.

The decrease in potential growth rate persists despite a boom in the semiconductor industry, resulting from a combination of structural factors such as declining labor input due to low birth rates and an aging population, and slowing productivity. Factors cited as contributing to the decline include an aging population, deteriorating profitability in manufacturing, and reduced construction investment.

Potential growth rate refers to the maximum growth rate achievable without causing inflation. While the semiconductor industry could potentially boost potential growth, some analyses suggest the sustainability of this boom is uncertain.