OECD lowers Korea's 2025 potential growth below 2%

As the Bank of Korea has lowered its economic growth forecasts for the next two years to the one percent range, projections indicate that Korea's economic growth rate will fall short of its potential growth rate for six consecutive years through next year. This prolonged underperformance, due to sluggish productivity, raises concerns about a structural economic downturn.

According to data submitted by the Bank of Korea to Democratic Party lawmaker Yang Bu-nam of the National Assembly's Public Administration and Security Committee on Sunday, the OECD projected in May that Korea's GDP gap—the difference between actual GDP and potential GDP—would remain negative from 2020 through next year. A sustained negative GDP gap indicates that a country's production factors, such as facilities and labor, are not being fully utilized, suggesting the potential for a prolonged economic downturn.

As warnings about Korea's economic growth continue to emerge, some experts argue that the country may already be entering a structural long-term recession. "Six consecutive years of a negative gap suggest that Korea is already facing a structural economic downturn,” said Kang Sung-jin, a professor of economics at Korea University. “It’s time to fundamentally question whether the traditional manufacturing-centered economic growth strategy has reached its limits."


신아형 기자 abro@donga.com