Necessity of Balanced Development and Structural Reforms to Overcome Low Growth in the Korean Economy
The Bank of Korea recently released a report emphasizing that South Korea’s potential growth rate has been continuously declining and that proactive reforms and balanced development are necessary for recovery. According to the report, South Korea’s potential growth rate, which exceeded 5% in the early 2000s, is projected to fall to 1.8% between 2025 and 2029. Furthermore, the report warns that if structural reforms are not implemented, the rate could drop to near 0% by the late 2040s.
The decline in South Korea’s potential growth rate has been attributed to the lack of an innovation ecosystem and inefficiencies in resource allocation. The report highlights the necessity of active structural reforms, including labor market restructuring, increasing birth rates, and expanding workforce participation among women and the elderly.
Meanwhile, the concentration of population in the Seoul metropolitan area is having a severe impact on the Korean economy. Between 2015 and 2021, approximately 78.5% of net migration into the Seoul metropolitan area consisted of young people aged 15 to 34, exacerbating the low birth rate problem and deepening regional disparities. In response, the Bank of Korea has proposed a balanced development strategy focused on strengthening industries and social infrastructure (SOC) in non-metropolitan areas and fostering key regional cities.
Economic experts emphasize that in this crisis, cooperation between the government and businesses is more crucial than ever. Based on political stability, policies should promote structural reforms and innovation while addressing resource imbalances between metropolitan and non-metropolitan areas.
This report sheds light on the structural challenges facing the South Korean economy and reiterates the need for an integrated approach involving the government, businesses, and local communities to address these issues collaboratively.
