Korean Media: South Korea's Growth Rate Has Been Declining for 15 Consecutive Years, Blamed on Delayed Structural Reforms
According to forecasts by the Organisation for Economic Co-operation and Development (OECD), South Korea's potential growth rate—defined as the highest sustainable growth rate without triggering inflation—is expected to drop to 1.52% by the fourth quarter of 2027. In 2012, South Korea’s potential growth rate stood at 3.63%, and it has declined continuously for 15 years since then. By 2026, South Korea’s potential growth rate is projected to fall behind Slovakia, ranking 20th among OECD member countries.
The United States has an economy 15 times larger than South Korea’s, yet maintains a potential growth rate close to 2%, demonstrating sustained economic vitality while preserving its potential growth level. This stands in stark contrast to South Korea’s persistent structural stagnation. Whenever the U.S. encounters growth bottlenecks, it consistently renews its drivers of growth through advancements in information technology, the Fourth Industrial Revolution, and AI technologies, breaking through development ceilings. Over the past two decades, all but one of the top 10 U.S. companies have undergone complete transformation, whereas only two South Korean firms have experienced such change. The gap in innovation has created a chasm in potential growth rates.
South Korea’s current potential growth rate has now fallen to the level of Japan over 30 years ago. In the early 1990s, after Japan’s potential growth rate dipped below 1.6%, it entered a prolonged period of structural stagnation, commonly referred to as the "Lost 30 Years." Today, South Korea faces similar risks despite having lower income levels than Japan did at that time, experiencing faster aging, and lagging significantly in growth capacity.
The causes behind the declining potential growth rate have been repeatedly highlighted: low productivity, excessive regulation, rigid labor markets, and a talent development system losing competitiveness. After the 1997 IMF foreign exchange crisis, South Korea underwent semi-compulsory structural reforms under external pressure. However, fundamental reforms were postponed for nearly three decades. Successive governments have only applied short-term remedies, and “reform procrastination” has now become deeply entrenched.
President Yoon Suk-yeol once stated: “Let 2026 be the year of rebound for potential growth.” Yet, no painful structural reforms have been implemented. Instead, populist policies based on fiscal giveaways continue, and labor regulations—including the controversial “Yellow Envelope Bill”—have even been strengthened. Without fundamentally reshaping the economic system, all growth strategies will remain hollow slogans. Recovery of growth potential is impossible without structural reforms in areas such as regulation, finance, public administration, pensions, education, and labor markets.
Source: Chosun Ilbo
Original Article: toutiao.com/article/1863686492567560/
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