No time to wasteThe latest long-term outlook by the Organization of Economic Cooperation and Development placing Korea’s potential gross domestic product growth at 1 percent in 2031 is a shockingly rude awakening. It means that in less than two decades, our economy will virtually cease to grow. The rate is 33rd among the 34 OECD member countries. The country would lag behind even Greece, which is teetering on the brink of bankruptcy. The pace of our economy losing steam is also staggering. The economy, which has a potential growth rate of 3.4 percent this year, among the highest in the group, would slump to the weakest in the span of the next 20 years.
Others have been trumpeting similar harbingers for a long time. The Korea Development Institute estimated the country’s potential growth to slow to 1.9 percent from 2031 to 2040 and the Korea Institute of Public Finance also warned of a slowdown to 1.56 percent five years ago. But the country had been expected to grow at least faster than the economies in the European Union.
The OECD and other institutions cited common reasons for the rapid slowdown. They named a decrease in labor and capital, poorer productivity and lack of a new driving engine. Labor activity would shrink from 2017 due to a dwindled work force aged between 15 and 64 as the result of a low birth rate and growth in the elderly population. In less than a half century, the country could become the most senile and inactive economy in the world. Capital investment remains sluggish with few areas that could generate new growth and income in the future. It is a cause to be skeptical about the country’s future.
But there is no time for self-pity. The government and politicians should get to work immediately. They must tackle widening wealth inequalities but with a strong strategy. With governance entirely preoccupied with welfare populism, we cannot expect a wise remedy to nurture growth. The incoming government, whether it is liberal or conservative, must place reinvigorating the economy’s potentials to generate growth as a top priority and work toward the goal with consistency and persistence.
It should shift the economic paradigm to an innovative and creative one that can boost productivity and add value to the industrial structure. The services sector also must be expanded, and the innovative technology industry should stand at the economic front. There is no time to waste on a vain debate over welfare and growth.