SEOUL, December 09 (AJP) - South Korea’s potential economic growth rate could fall to near zero by the 2040s without major structural reforms, Bank of Korea Governor Rhee Chang-yong warned on Tuesday.
Speaking at a symposium co-hosted by the BOK and the Korean Finance Association, Rhee said the country’s potential growth rate has slowed sharply from around 5 percent in the early 2000s to below 2 percent in recent years.
Rhee attributed the deceleration to a shrinking labor force driven by low birth rates and rapid population aging, as well as weak corporate investment and insufficient gains in productivity. He also pointed to inefficient resource allocation, with capital flowing into less productive sectors.
“Finance plays a critical role in reallocating limited resources toward more efficient sectors, which in turn drives innovation and productivity,” Rhee said.
Rhee cited an internal study by the central bank suggesting that redirecting credit toward more productive industries could raise South Korea’s long-term growth rate by around 0.2 percentage points.
* This article, published by Aju Business Daily, was translated by AI and edited by AJP.
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