South Korea’s economic progress is on the verge of slipping below the Organization for Economic Cooperation and Development (OECD) average for the third consecutive year, unless exports pick up quickly.
The OECD’s interim report, “Confronting Inflation and Low Growth,” maintained the nation’s 2023 growth and inflation outlook at 1.5 percent and 3.4 percent, respectively, indicating no significant changes in the country’s situation since June.
In comparison to other OECD countries’ recent recoveries, Korea’s growth rate is likely to remain below the average, signifying that the country is caught in a slow growth trap due to structural problems rather than a momentary export-driven economic weakness.
In 2022 and 2021, Korea’s growth rate was 2.6 percent and 4.3 percent, respectively, both of which were lower than the OECD average of 2.9 percent and 5.8 percent. The nation’s growth forecast for this year is 1.5 percent, just above the OECD’s 1.4 percent. However, the outlook is far from optimistic, seeing as the organization has raised the growth forecasts for countries such as the United States (2.2 percent) and Japan (1.8 percent).
The Finance Ministry, Bank of Korea, International Monetary Fund, and Asia Development Bank have all predicted that Korea’s growth rate will be 1.4 percent, 1.3 percent, and 1.1 percent, respectively. The outlook for 2024 is also bleak, with some foreign investment banks expecting the country’s growth to stay within the 1 percent range for both 2023 and 2024.
If this prediction comes true, it will be a cause for alarm for Korean authorities, as it would mean that Japan’s growth rate is higher than Korea’s for the first time since 1998. Experts believe that the sluggish growth is due to structural limitations, such as the nation’s reliance on semiconductors and China as its primary export market.
To reverse the decline, the government must take steps to address the changing global trade environment and encourage businesses to diversify their export markets.