Korea enters low-growth era

GDP expected to grow slower than world average

The Korean economy is entering a low-growth era, with its gross domestic product (GDP) expected to grow slower than the world average in the coming decade due to the stagnation of its twin growth engines of exports and domestic demand.

Exports are growing at an increasingly slower rate, while domestic consumption has remained in a slump for years due largely to the tight job market and soaring prices of goods and services. The economy has also been suffering from a shrinking labor force as a result of an aging population and low birthrate.

According to the latest economic report released Monday by the International Monetary Fund, Korea’s economy will grow at 3.25 percent this year, lower than the 3.53 percent predicted for the global economy. In 2011, the total value of goods and services produced here expanded by 3.63 percent, also lower than the 3.85 percent for the global economy.

The Washington-based organization projected that Korea’s GDP will continue to increase at a slower rate in the future. It also said from 2016, its growth rate will fall, while that of the world economy heads upward.

In 2016, the Korean economy is forecast to expand by 3.97 percent from the previous year, lower than 4.02 percent growth in 2015. In contrast, the global economy is projected to expand 4.62 percent in 2016, higher than the 4.55 percent a year earlier, the IMF said.

In 2017, Korea’s GDP growth rate will decline further to 3.96 percent, while the world economy grows at 4.66 percent.

The IMF forecast that Taiwan, which is engaged in fierce competition with Korea in the international consumer market, will expand at 4.8 percent in 2015, 4.9 percent in 2016 and 4.96 percent in 2017, exceeding international growth rates.

“To spur growth, Korea must boost its potential as quickly as possible,’’ said Kwon Soon-woo, a chief economist at Samsung Economic Research Institute. “The country should increase the size of its labor force and inject more capital into the economy, among other steps.’’

The growth potential refers to the growth rate that an economy can achieve through the utilization of its capital and workforce at full capacity without fueling inflation, with the current figure for Korea at 3.4 percent.

The Organization for Economic Cooperation and Development recently projected that Korea’s potential growth rate will fall to an annual average of 2.4 percent between 2018 and 2030.

Kwon said the nation should raise its birthrate and strengthen labor productivity by more effectively mobilizing the existing economically productive population, particularly women and young people.

“Policymakers should enhance fiscal soundness and help financial institutions cope with outside shocks. They also need to ease regulations and take other measures to encourage businesses to invest more and hire more workers,’’ the economist said. <The Korea Times/Lee Hyo-sik>

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