"South Korea's Growth Rate May Fall to 0% by 2050: Bleak Outlook from National Research Institute"

KDI Releases Report on 'Long-term Economic Growth Rate Forecast and Implications'

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] A bleak forecast from a government-funded research institute has emerged, suggesting that South Korea's economic growth rate could plummet to 0% by 2050. It is urgently pointed out that strong economic structural reforms are needed to boost productivity growth.

The Korea Development Institute (KDI) released a report titled "Long-term Economic Growth Rate Outlook and Implications" on the 8th, stating, "Since the 2020s, changes in population structure such as population decline and rapid aging have gradually slowed the growth momentum of our economy."

KDI analyzed that after the global financial crisis, the growth rate of our economy declined due to a slowdown in productivity improvement, and going forward, changes in population structure will be a major cause of the decline in growth rate.

According to the report, the growth rate of GDP per capita is expected to fall from 2.0% during 2023?2030 to 1.6% during 2031?2040 and 1.3% during 2041?2050 due to a decrease in the working-age population caused by aging. If the total factor productivity growth rate declines, the growth rate is projected to fall to as low as 1.0% or even into the 0% range by 2050. Looking at detailed projections: ▲If total factor productivity growth reaches 1.3% in 2050 through active economic structural reforms, the growth rate is analyzed to be 1.0%. ▲If total factor productivity growth is 1%, the growth rate will be 0.5%. ▲If total factor productivity growth stagnates at the 2011?2019 level of 0.7%, the growth rate is estimated to fall to 0%.

The potential growth rate of our economy for the next five years, 2023?2027, was presented as 2.0%.

KDI stated, "The 2050 economic growth rate forecast (0.5%) assumes that the productivity growth rate rebounds somewhat from the low level of 2011?2019 and maintains 1%," adding, "It is necessary to actively promote structural reforms in our economy and improve productivity to mitigate the negative effects of population structure changes."

Directions for economic structural reform include ▲improving productivity through institutional reforms such as external openness and regulatory rationalization ▲expanding labor market participation of women and the elderly, who have low economic activity participation due to childbirth and childcare, and actively accepting foreign labor ▲strengthening the qualitative capabilities of human capital through education reform.

KDI emphasized, "The long-term economic growth rate decline trend should be reflected in macro policy setting," and added, "While efforts to strengthen the growth potential of our economy are necessary, pursuing targets that greatly exceed the potential growth rate through short-term economic stimulus policies should be avoided."

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