South Korea's Potential Growth Rate Falls Below 2%

An analysis by an overseas institution reveals that South Korea's potential growth rate for this year is expected to drop below 2% for the first time in history. This development raises concerns about the country's entrenched low-growth trend, especially when compared to the United States, which boasts a much larger economy and a potential growth rate exceeding 2%.

OECD's Latest Findings

The Organization for Economic Cooperation and Development (OECD) has estimated South Korea's potential growth rate at 1.9% in its recent report, a slight decrease from the previous 2.0% estimate in December last year. This marks the first instance the OECD has projected South Korea's potential growth rate to fall into the 1% range.

Understanding Potential Growth Rate

Potential growth rate, indicative of the maximum production achievable without triggering inflation, has been on a steady decline in South Korea since 2011. From maintaining a 3% range until 2017, it dipped to the 2% range, with a sudden drop anticipated this year.

Global Comparisons and Future Outlook

When compared to G7 countries, South Korea's potential growth rate is now trailing behind the United States and is at risk of being overtaken by other nations. The Bank of Korea and the new government are exploring measures to revive the growth rate, with aspirations to reach a 3% potential growth rate.