The Bank of Korea: "Key Industries Like Automobiles Are Sluggish... Productivity Growth Must Recover"

On the 24th, BOK Presents 'Factors Behind South Korea's Productivity Slowdown and Improvement Measures'
Entry Barrier Index for Korea at 1.72... Exceeds OECD Average

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Amid sluggish growth in key industries such as automobiles and information and communication technology (ICT) due to intensified global competition, there are calls to restore the productivity growth trend.

According to the Bank of Korea's BOK Issue Note dated the 24th, titled "Factors Behind the Slowdown in Productivity in Our Country and Improvement Measures" (written by Jeong Seonyeong, Associate Research Fellow at the Macroeconomic Research Office of the Economic Research Institute, and Lee Solbin, Research Officer at the Research Coordination Office), the average annual growth rate of labor productivity in key industries such as electronic components, automobiles, other machinery, and shipbuilding has fallen by 10.3 percentage points since the crisis.

Furthermore, it was argued that market inefficiencies are being compounded by weakened corporate dynamism due to high entry barriers.

According to data published by the Organisation for Economic Co-operation and Development (OECD) in 2020, South Korea's product market regulation ranks third highest among 34 OECD member countries, and the regulatory index related to entry barriers is 1.72, significantly exceeding the OECD average of 1.18.

The research team identified downward pressures on productivity including ▲ simultaneous contraction of consumption and investment ▲ slowdown in labor and capital input ▲ weakening of global supply chains and innovation potential. They also predicted that if restructuring of marginal companies is delayed, market inefficiencies will increase, further intensifying downward pressure on productivity.

The research team emphasized, "It is necessary to improve structural factors causing the productivity slowdown and proactively respond to the new normal by minimizing the impact of COVID-19." They stated that overcoming the limitations of physical input through expanding effective input and promoting coexistence between large corporations and small and medium-sized enterprises is essential.

Additionally, they stressed the need to enhance corporate competitiveness through proactive and selective restructuring while reducing regulations related to innovative corporate activities.

This content was produced with the assistance of AI translation services.