South Korean media: OECD: South Korea's potential growth rate this year is 1.7%, ranking 20th—surpassed by Slovakia

¬ "The temporary boom in semiconductors has not been reflected in potential growth rate"; next year’s rate at 1.57%, ranking 21st… below Nordic representative country Sweden

Projections suggest South Korea’s potential growth rate this year will be around 1.7%, falling further to about 1.5% next year.

On the 26th, the latest statistics from the Organization for Economic Co-operation and Development (OECD) showed that South Korea’s projected potential growth rate for this year is 1.71%, a decrease of 0.21 percentage points from 1.92% in 2025. Potential growth rate refers to the highest sustainable growth rate without triggering inflation, representing the economy’s underlying strength.

Despite South Korea’s “surprise growth” of 1.7% in the first quarter, some international investment banks (IBs) forecasted that the country’s economic growth rate this year could reach as high as 3%. However, the OECD views this merely as a short-term phenomenon driven by the semiconductor boom. According to Dr. Joo Won (name transliteration), Director of the Department at the Hyundai Research Institute, "Prosperity in specific industries such as semiconductors has not been reflected in the potential growth rate."

In 2025, South Korea’s potential growth rate ranked 19th among the 36 OECD member countries, just behind Chile (2.00%) and Latvia (1.99%). This year, however, it was overtaken by Slovakia and dropped to 20th place. Slovakia, dubbed the "Detroit of Eastern Europe," is a manufacturing powerhouse in automobiles and other sectors. Yet, the pandemic and the Ukraine war have hampered its productivity—South Korea now trails behind such a nation.

The OECD forecasts South Korea’s potential growth rate for 2027 at 1.57%, a further decline of 0.14 percentage points year-on-year. Its ranking will also fall below advanced welfare nations like Nordic Sweden (1.66%), dropping to 21st place.

According to OECD calculations, South Korea’s potential growth rate has been declining continuously for 16 consecutive years since 2012 (3.63%). Analysts attribute this to the globally rare combination of low fertility and rapid aging, compounded by an industrial structure overly dominated by specific sectors such as semiconductors, which prevents the economy from breaking through structural ceilings. On the 20th, former Bank of Korea Governor Lee Chang-young, in his farewell address, stated: "For structural challenges currently facing South Korea’s economy—such as education, housing, balanced development, youth employment, and elderly poverty—I hope these issues can be studied as long-term priorities."

Source: Chosun Ilbo

Original article: toutiao.com/article/1863591925981196/

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