What Can Drive the Republic of Korea’s Future Growth?

As highlighted by a recent report entitled “Is Korea’s Economic Growth Miracle Over?” (Davies 2024) there is considerable concern that the current growth model that has fostered the Republic of Korea’s meteoric rise is in dire need of refurbishment. Korea’s strong growth performance prior to the Financial Crisis of 2008–09 was halved between 2011 and 2019 to an average annual rate of 2.9 percent and it then dipped further to 1.8 percent per annum during 2020–23. With near-term forecasts indicating only a modest improvement and the workforce peaking, the government is looking for ways to reverse the slowdown and to restore Korea’s previous economic momentum. In fact, the OECD has Korea’s potential growth rate sinking to 1 percent by 2030 (Davies 2024).

President Yoon has announced the goal of enlarging the economy’s “structural growth potential” by promoting advanced manufacturing and services and bolstering economic innovativeness through research both basic and applied. Mid-sized firms and start-ups are expected to reinforce the efforts of the large corporations and to increase their role in the innovation process. The underlying question is whether any of these proposed measures is sufficient to slow down Korea’s negative growth trajectory.

Author:
Shahid Yusuf
Chief Economist, The Growth Dialogue, George Washington University School of Business. Send comments
to shahid_yusuf@hotmail.com, copied to info@growthdialogue.org.

Publication:
The Growth Dialogue

Publication Year:
May 2024

Download:
What Can Drive the Republic of Korea’s Future Growth?