Long-term growth forecasts gloomy for Korean economy

Economy

Published: 28 Jul. 2017, 19:48

Long-term growth forecasts gloomy for Korean economy

Potential economic growth in Korea for the years 2016 to 2020 has fallen due to an aging population and weakened economic growth engines, according to the Bank of Korea chief.

“The growth engine for the economy has weakened, leading to a fall in potential growth,” BOK Governor Lee Ju-yeol said at a forum with business executives on Jeju Island on Friday.

The BOK expected Korea’s growth to be at around 2.8 to 2.9 percent between 2016 and 2020. The Organization for Economic Cooperation and Development predicted that the country’s growth rate could fall to 2.2 percent in 2030 and to as low as 1.4 percent in 2050.

Reasons behind the decline include slow growth in labor productivity and ineffective distribution of wealth due to an unbalanced economy, Lee argued. “We need to work on dealing with the aging population and improving productivity, while also developing new, sustainable growth sectors.”

Lee suggested that the government come up with plans that actively involve youths and the elderly in the labor market, improve low birthrates and working conditions for women, and strengthen public education. The governor added that some market regulations should be eased to raise productivity, and emphasized the importance of wealth distribution, including stabilizing the housing market and easing the financial burden of household debts.

While Lee pointed out some negative economic factors, he also asserted that Korea has become a developed country.

“We became the seventh country in the world with a population of more than 50 million to achieve a per-capita GDP of $20,000, and we are the world’s seventh-biggest exporter,” Lee said. Korea’s per-capita GDP passed $20,000 in 2012 and it was the seventh-largest exporter as of 2016.

He attributed Korea’s economic successes to high-quality labor and strategies formed during the country’s industrialization that focused on manufacturing and exports.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]