What’s your vision for the economy?

In a shocking development, the Organization for Economic Cooperation and Development (OECD) has forecast that Korea’s potential growth rate will be less than 2 percent from now on. The OECD expected the growth rate to fall to 1.9 percent this year and 1.7 percent next year. This alarming potential growth rate is a first for the country. Korea’s potential growth rate was 5.4 percent in 2001, but it has continued declining since. If the barometer of economic fundamentals rings the alarm and the slow growth is prolonged, that’s a serious crisis.

The main reason for the decline is our low birth rate and fast aging. The total fertility rate in the second quarter was 0.7, a record low. According to the projection by the National Assembly Budget Office, the population under age 15 will decrease to 3.18 million in 2040, nearly half that of the 6.32 million in 2020. Korea will face a population cliff in 10 to 20 years. Another reason is the low productivity of the economy. If productivity is high despite a reduced population, an economy can grow. But sadly, this does not apply to the country.

The government’s reform drive across the labor, pension and education sectors could not bear fruit in the face of vehement resistance from stakeholders and opposition from political circles. In the United States, where companies can hire and fire employees freely, restructuring is active and it creates new jobs without a letup. In Korea, due to the rigid labor market and chronic regulations, quality jobs cannot be created as much as young jobseekers want. Coupled with high private education costs and worries about post-retirement life, an increasing number of young people are shunning marriage.

Korea’s export-driven economy is stuck in a predicament due to the unceasing disruptions with supply chains from the deepening hegemony war between the United States and China — and due to the shrinking export markets from deepening international conflicts. The International Monetary Fund projected Korea’s GDP to be reduced by 4 percent if the derisking from China accelerates. The IMF said Korea will be the biggest victim, besides China, of the derisking.

Despite the colossal challenges for the economy, the government has not presented any solutions to rescue the economy from the crisis. The Yoon Suk Yeol administration didn’t show any of its iconic slogans for the recovery of our economy. If the government immediately cuts next year’s budget for research and development on a presidential order, the economy cannot be sustained. Innovating national systems through methodical restructuring is the only answer. We hope the government finds a long-term strategy to save the economy before it’s too late.