Economics Community: "South Korea's Economic Growth Rate in the 1% Range in 5 Years...Urgent Need for Regulation and Education Reform"

52nd President of the Korean Economic Association, Professor Jonghwa Lee, Korea University

[Asia Economy Reporter Seo So-jeong] Economists have issued a pessimistic forecast that South Korea's economic growth rate will fall to the 1% range in five years if the current situation continues.

According to a survey conducted by the Korean Economic Association on the theme of 'economic growth' on the 15th, 18 out of 37 domestic economists (49%) responded that if there is no policy change, South Korea's economic growth rate will drop to the '1% range' in five years.

Among the respondents, 15 predicted a growth rate of 2% in five years, while 3 expected the growth rate to remain in the 0% range. Only one respondent forecasted a growth rate of 3% or higher.

Professor Heo Jeong of Sogang University said, "If the current trend continues, it is expected to converge to around 1.5% in five years," adding, "Since high inflation is anticipated, it will be difficult to achieve significant real economic growth." Professor Ahn Jae-bin of Seoul National University predicted that according to Professor Kim Se-jik's '5-year 1%P decline rule,' the five-year moving average will enter the 0% range by 2027.

Looking at the five-year moving average of South Korea's economic growth rate, it has shown a continuous downward trend from 5.9% in 1998 to 5.0% in 2003, 4.3% in 2008, 3.1% in 2013, and 2.1% in 2018.

In particular, the most cited main cause of the long-term decline in South Korea's economic growth was "the sluggish formation of effective human capital due to decreased investment efficiency in human capital," chosen by 9 respondents (24%). This was followed by a decrease in private companies' investment and innovation incentives due to excessive government regulation, cited by 7 respondents (19%).

Other causes mentioned for the downward growth trend included productivity decline due to demographic changes from low birth rates and aging, distortion in the allocation of production factors due to labor market rigidity, and contraction of corporate innovation caused by increased uncertainty related to rapid changes in the global economic environment.

The most effective policy responses to reverse the growth trend were identified as "regulatory reform related to constraints on corporate activities" and "protection of property rights and educational system reform for the accumulation of creative human capital," each chosen by 11 scholars.

Professor Lee In-ho of Seoul National University's Department of Economics said, "As the Korean economy grows, the easy growth strategy of copying past advanced countries no longer works, but the economic and social environment is too hostile for companies to respond properly," adding, "This hostile social atmosphere has materialized as regulations on companies, resulting in the deterioration of corporate creativity."

Professor Kim Hee-sam of Gwangju Institute of Science and Technology emphasized, "The core direction of reform is to change the content and methods of education to cultivate creative ideas, which are becoming the most important production factor, and to transform the university entrance-centered, highly concentrated education competition system into a lifelong learning system."

Professor Lee Jong-hwa of Korea University, who serves as the president of the Korean Economic Association, added, "The slowdown in labor force growth and the decline in capital accumulation rates have contributed to the decrease in GDP growth rate," noting, "Various factors such as labor market rigidity, in addition to government regulation, have played a role."

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