By Kang Seung-woo
Staff reporter
Shortly after basking in the limelight of a high potential growth rate, South Korea is expected to see its economic capability weaken drastically in the long run due to a low birthrate and an aging society.
In its latest economic outlook, the OECD said that South Korea's potential growth rate would tumble to an average of 2.4 percent between 2012 and 2025.
The outlook is quite disappointing, given that the Paris-based organization reported that the fourth-largest Asian economy would hit an average of 4 percent in 2010 and 2011, the highest figure among its 30 member countries. The number is three times higher than the OECD's average of 1.2 percent.
Korea was forecast to rank fifth at 3.7 percent, in the 2012 to 2015 period followed by Turkey, Chile, Slovakia and Luxemburg, but its rate may suffer a stiff decline, halving to 1.9 percent from 2016 to 2025, below the OECD average of 2 percent, which is likely to be a great hurdle in the future.
"It is no wonder that the potential growth rate will go down due to the low birthrate and an aging society. From 2017, resources and employment will play a limited role in boosting economic growth due to a falling population of those in the working age," Samsung Economic Research Institute (SERI) Vice President Hwang In-seong said.
"As an alternative plan to raise the potential growth rate, the government needs to boost productivity through technology innovation."
The government is seeking measures to maintain the status quo.
"'In order to hold the potential growth rate at the 4-percent level, the government has made efforts, unearthing new growth engines such as green industries," said an official of the Strategy and Finance Ministry. "But an aging society and a lack of jobs are big obstacles to growth."
The OECD said that the nation would maintain 0.8 percent in employment growth potential until 2011, but see it sink to minus 0.4 percent after 2012, tying with Germany, Finland and Hungary.
Korea is suffering from the world's lowest birthrate although the government has promoted a variety of incentives to encourage people to have children.
According to Statistics Korea, the country's birthrate was 1.15 in 2009, the lowest since 1.08 in 2005 and well below the OECD average of 1.73.
In addition, Korea is expected to become one of the top four aging societies among the G-20 countries in 2030, which is most likely to hurt national competitiveness.