Government's Fiscal Efforts Fall Short in Reviving Growth

Despite injecting approximately 30 trillion won through supplementary budgets, the South Korean government's efforts to enhance the economic growth rate have shown minimal impact. Experts estimate a modest increase of only 0.1 to 0.2 percentage points, highlighting the limitations of fiscal spending alone in achieving significant growth targets.

Structural Reforms Lag Behind

The lack of initiative in addressing low-productivity sectors and the acceleration of anti-business legislation have further complicated efforts to improve the growth rate through structural reform. Experts emphasize the need for fiscal spending to complement structural reforms to strengthen the economic constitution.

Korean Economy Faces Low Growth Trap

A survey reveals that about 84% of domestic companies believe their main products have reached growth potential limits, with sectors like oil refining, petrochemicals, automobiles, and electronics expressing particularly negative outlooks. The pursuit of new businesses remains sluggish, with over half of companies not considering replacements for their current main products.

Potential Growth Rate Continues to Decline

Korea's potential growth rate has been on a downward trend for 14 consecutive years, with projections for this and next year at 1.94% and 1.88%, respectively. This steep decline compared to competitors like the United States raises concerns about the country's economic future.

Government's Mega Investment Plans

In response, the government plans to establish a national fund of at least 100 trillion won for advanced innovative industries and provide bold tax support for national strategic projects. However, skepticism remains about the immediate impact of these initiatives on growth.

Tax Policy Disappoints

The recent tax reform plan, including a uniform increase in corporate tax and the discontinuation of temporary investment tax credits, has drawn criticism. The changes are expected to impose an additional 35 trillion won in taxes over five years.

Call for Strategic Focus on Technology

Experts urge the government to concentrate on technological advancements and establish a comprehensive master plan to raise the potential growth rate to 3%. Regular progress checks and presidential oversight are recommended to ensure the success of these efforts.