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'The nation's economy could shrink by 2040,' a BOK report says

'The nation's economy could shrink by 2040,' a BOK report says

Posted June. 11, 2024 07:55,   

Updated June. 11, 2024 07:55


South Korea is facing a grim economic outlook. With unprecedented ultra-low birth rates and rapid aging, compounded by a sharp drop in corporate productivity growth to near zero, this confluence of factors could result in negative economic growth by the 2040s, according to a recent report.

The Economic Research Institute of the esteemed Bank of Korea, in a report published on its official blog, issued a stark warning. It stated that unless there is a significant rebound in birth rates and substantial improvements in productivity, the nation's economy could shrink. The report's 'low productivity scenario' projects a decline in South Korea’s average annual economic growth rate from 2.1% in the 2020s to 0.6% in the 2030s, and to -0.1% in the 2040s.

This scenario is becoming increasingly plausible as the productivity of South Korea's innovative companies has stagnated, undermining economic vitality. According to the Bank of Korea's analysis, the productivity growth rate of domestic innovative firms that filed patents in the United States plummeted from an annual average of 8.2% between 2001 and 2010 to just 1.3% from 2011 to 2020. Consequently, Korean companies' overall productivity growth rate also dropped from an annual average of 6.1% to 0.5%.

“To steer our economy towards growth, it is imperative to boost corporate productivity,” emphasized Economics Professor Kim Sang-bong of Hansung University. “The government must foster an environment that nurtures innovative companies, akin to the likes of Tesla and Nvidia, to emerge and thrive.”

소설희 facthee@donga.com