South Korea’s potential growth rate will fall closer to 1.5 percent next year. The OECD released new data on Sunday. The rate will slip to 1.71 percent in 2026 from 1.92 percent in 2025. It will slide further to 1.57 percent in 2027.
Korea’s potential growth rate has fallen steadily since 2011 when it stood at 3.75 percent. The rate dropped from 2.41 percent in 2023 to 2.28 percent in 2024. It then fell below 2 percent for the first time in 2025.
The OECD projection ranks Korea at No. 20 among member economies. Slovakia overtook Korea despite having a GDP per capita 6,000 dollars lower. The rate will fall to 1.57 percent in 2027, dropping Korea to No. 21 behind Sweden.
Quarterly projections show the rate falling from 1.81 percent in late 2025 to 1.66 percent in late 2026. The IMF estimates Korea’s output gap at minus 0.9 percent this year. That marks five straight years in negative territory.
Weakening productivity ties directly to rapid aging and low birth rates. Korea’s heavy dependence on chip manufacturing also contributes. Nomura economist Park Jeong woo said single industry reliance could weaken Korea’s fiscal base. Exposure to cyclical volatility makes the economy vulnerable to external shocks. Park cited Finland’s Nokia shock as a cautionary example.
The government put a 3 percent potential growth target at the heart of its five year economic plan. President Lee Jae Myung called reversing the decline the most urgent task. He demanded bold structural reforms in regulation, finance, pensions, education and labor. The growth decline deepens as policymakers search for effective solutions.
