Gloomy Forecast
The Hyundai Research Institute said on January 24 that Korea’s potential economic growth rate is likely to dip below 3% in the near future and fall to 1% or so in the mid-2020s with the population aging, a low fertility rate continuing and its capital input reaching its limit. According to the institute, Korea recorded a potential economic growth of 3.2% in the period of 2011 to 2015.
The research institute provided three scenarios – basic, optimistic and pessimistic – with regard to Korea’s potential economic growth rate until 2030. According to the basic one, the rate is forecast to reach 2.7% between 2016 and 2020 and fall to 2.3% and 2.0% between 2021 and 2025 and between 2026 and 2030, respectively.
According to the optimistic scenario, it is estimated at approximately 3.2% for 2016 to 2020, 2.9% for 2021 to 2025 and 2.7% for 2026 to 2030. The rate is not expected to fall below 3% until the mid-2020s if the total factor productivity is maximized and labor and capital inputs are increased.
In the pessimistic scenario, the rate is estimated to reach about 2.4% between 2016 and 2020, 2.1% between 2021 and 2025 and 1.8% during the rest of the period. It is predicted to fall down to slightly less than 2% in the late 2020s in the case of a low level of total factor productivity, sluggish investment and stagnation in labor supply