The International Monetary Fund (IMF) projects that South Korea's potential growth rate will rise to 2.14% this year and 2.20% next year, marking two consecutive years of growth. This is the first time the potential growth rate has shown an upward trend for two years in a row since the late 1980s.
The Saemaul Undong (New Village Movement) and the Miracle on the Han River brought about a period of dense economic growth. However, the rapid pace of growth led to long-term stagnation and a longing for new growth engines, which have been persistent challenges for the economy. In this context, the rebound in potential growth rate represents a rare structural opportunity.
The projections themselves are encouraging. Among 27 advanced economies analyzed, South Korea ranks seventh in potential growth rate for both this year and next, surpassing all G7 countries except the United States. The IMF also forecasts that South Korea's real GDP growth rate will remain solid, recording just above 2% this year, while per capita GDP continues to rise steadily, solidifying its status as a developed nation.
On the surface, it appears that the South Korean economy is on the brink of a new leap forward. However, it is essential to confront the reality. Behind the impressive numbers lies a phenomenon referred to as the 'semiconductor illusion.' The recent growth has been entirely reliant on a semiconductor export boom fueled by the artificial intelligence (AI) surge and increased capital investment from large corporations.
When the semiconductor illusion is stripped away, the true state of the economy is less than favorable. The domestic market has frozen due to prolonged high inflation and interest rates, and the plight of small business owners is deepening. Housing prices continue to soar, and the birth rate remains low. There are legitimate concerns about whether the real growth rate can keep pace with the potential growth rate amid such challenging living conditions.
The Organisation for Economic Co-operation and Development (OECD) has issued a stark warning, projecting South Korea's potential growth rate to fall to 1.6% this year and 1.5% next year, in stark contrast to the IMF's outlook. This decline is attributed to a rapid demographic decline and delays in restructuring. The polarization between large and small enterprises, as well as between exports and domestic consumption, has reached extreme levels. Believing that the economy's strength has fully recovered based solely on the performance of a few advanced information technology sectors would be a misjudgment.
What we need to do now is to reform the distorted growth structure that relies heavily on semiconductors. We must utilize the valuable time and resources provided by the semiconductor boom to diversify new growth engines and revitalize the neglected domestic economy.
Let us reward the results only after the semiconductor illusion fades and warmth spreads throughout the economy. Only then can we be confident that the South Korean economy has evolved to a higher level beyond the glory of 40 years ago. Opportunities are gifts for those who are prepared.
* This article has been translated by AI.
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