South Korea’s potential growth rate is anticipated to plummet to a record low by the fourth quarter of the upcoming year, continuing a decade-long downward trend, as per the Organization for Economic Cooperation and Development (OECD). The latest OECD data reveals that the country’s potential growth rate is forecasted to drop to 1.52 percent in the period from October to December next year, a significant decrease from 1.92 percent in the previous year and an estimated 1.71 percent for this year. The potential growth rate signifies the rate of growth in the potential gross domestic product (GDP), indicating the maximum output level an economy can sustain by fully utilizing labor, capital, and other resources without causing inflation.
Based on the most recent estimates by the OECD, South Korea’s potential growth rate has been consistently declining since 2012, when it was at 3.63 percent. If this trend continues into the following year, it will mark the 15th consecutive year of decline. The data also points out a widening disparity with the United States, with South Korea trailing the largest economy globally in potential growth since 2023. The gap has increased from 0.03 percentage points in 2023 to a projected 0.38 percentage points by next year.
In the midst of the Middle East crisis, the International Monetary Fund (IMF) has maintained its growth forecast for South Korea at 1.9 percent for 2026, as confirmed by the finance ministry. Despite revising down the global economy’s growth projection by 0.2 percentage points from its January forecast to 3.1 percent, the IMF has not altered its outlook for Asia’s fourth-largest economy. The Ministry of Economy and Finance reported that the country’s growth prospects remain unchanged due to robust exports and counterbalancing effects from a supplementary budget, according to the IMF’s latest World Economic Outlook report. The ministry emphasized the government’s commitment to upholding the current emergency response system amidst increased uncertainties and promptly implementing measures to stabilize prices, supply chains, and financial markets.
