[The Plummeting Korean Economy, Solutions] ① "Korean Economy Scores 3.2... Experts Warn Fundamental Strength Will Collapse Within 10 Years"

Korean Economy Gets a 'Failing Grade'...
Trapped in a 'Complex Crisis' of Low Growth and High Inflation
Potential Growth Rate to Plunge to 0% in 10 Years...
"It Could Happen Within 5 Years Without Innovation in New Industries"
The Core Cause of the Current Crisis: 'Lack of Leadership'...
Structural Problems Reinforcing and Entrenching Each Other

Editor's Note3.0%. This is the figure the new administration has set as its target for potential growth rate. This refers to the maximum growth rate that can be achieved by utilizing labor, capital, and productivity without fueling inflation?in other words, the 'capability' for annual sustainable growth that South Korea aims to raise to 3.0%. However, the fundamental strength of the Korean economy has been declining every year, dropping from 5% in the early 2000s to below 2% in recent years. The speed of this decline is also relatively fast compared to major countries around the world. To fundamentally strengthen the weakening economic foundation, short-term remedies are not enough. It is essential to actively address the shrinking working-age population due to low birth rates and aging, and to support the foundation for new innovative companies to take root, among other fundamental structural reforms. What kind of determination is needed, and where should we start? We asked 12 leading experts in various economic fields about the core causes of the current crisis and possible solutions.

Yonhap News Agency

As of June 2025, when the Lee Jaemyung administration took office, experts have assessed that the Korean economy is facing a 'crisis' situation, scoring only 3.2 out of 10 points. At this rate, they warn, the country's potential growth rate?its fundamental economic strength?may fall into the 0% range within 10 years, far from the new government's target of 3%. Experts point out that, with the economic contribution of labor sharply declining due to low birth rates and an aging population, and with little visible innovation across industries, the timeline for a drop to the 0% range could come even sooner if the current situation continues. In a scenario where a continued decline in the potential growth rate is expected, there is a growing consensus that not only immediate fiscal measures but also fundamental structural transformation to boost the country's economic foundation are urgently needed to achieve the new government's ambitious targets.

Korean Economy Gets a 'Failing Grade'... Trapped in a 'Complex Crisis' of Low Growth and High Inflation

On June 24, Asia Economy conducted an in-depth survey of 12 experts from industry, economic research institutes, and academia. All respondents unanimously agreed that "the current economic situation in South Korea is a crisis." The average 'current score' for the Korean economy was just 3.2 out of 10. The main reason for this failing grade was not a temporary shock, but rather a structural slowdown in growth, compounded by a lack of recovery momentum.

Experts warned that Korea is facing a 'complex crisis' in which export sluggishness is anticipated due to trade headwinds such as the US tariff war, while concerns over domestic demand stagnation are growing due to household debt, and the country's medium- to long-term growth potential continues to decline. In terms of the severity of the crisis, some even rated it a 10 out of 10, describing it as unprecedented. Kim Kyungjin, Vice President of the Institute for Global Economics, stated, "After the declaration of martial law, prolonged political instability has weakened Korea's ability to respond to the second Trump administration's policies. As major companies like Samsung lose their next growth engines, Korea's strength in semiconductors is diminishing, and competitiveness in advanced technologies such as artificial intelligence (AI) is also facing a crisis." Lee Insil, Director of the Korea Future Population Institute, also pointed out, "Both external and domestic factors are working negatively at the same time," and emphasized, "The lack of preparation for a low birth rate and aging society, as well as insufficient efforts toward innovation, are amplifying anxiety about the future, which is a core issue."

Potential Growth Rate to Plunge to 0% in 10 Years... "It Could Happen Within 5 Years Without Innovation in New Industries"

More than half of respondents (58.3%) predicted that Korea's potential growth rate?the fundamental strength of its economy?will fall to the 0% range within 10 years. They cited the stagnation in productivity growth and the trend of population aging, which are unlikely to reverse dramatically. Park Yangsoo, Director of the Sustainable Growth Initiative (SGI) at the Korea Chamber of Commerce and Industry, said, "As the contribution of labor to economic growth turns negative due to the shrinking working-age population, the potential growth rate will drop to the 0% range. Without efforts to improve productivity through technological innovation and market leadership, it will be impossible to overcome 0% growth."

Another 33.3% of experts said that the drop to the 0% range could happen within five years. Lee Jeongdong, Professor at Seoul National University Graduate School of Engineering Practice, warned, "If the current lack of entrepreneurial activity across industries continues, Korea will soon experience 'Peak Korea.'"

The Core Cause of the Current Crisis: 'Lack of Leadership'... Structural Problems Reinforcing and Entrenching Each Other

Experts unanimously agreed that the causes of the current crisis are complex and cannot be attributed to a single factor. Kwon Namhoon, President of the Korea Institute for Industrial Economics and Trade, said, "From a macroeconomic perspective, I would cite 'asset distortion centered on real estate and contraction of consumption,' while from a microeconomic perspective, 'delayed industrial transformation and insufficient investment in future industries' are key causes." He added, "Both are long-term, accumulated issues that can no longer be postponed, and as domestic and external conditions worsen, the problems have become even more pronounced."

In particular, experts pointed to a lack of momentum to resolve structural issues such as the intensification of competition due to concentration in the capital region, the world's lowest birth rate, inadequate preparation for population aging, the proliferation of 'zombie' players due to delayed restructuring, and the absence of new industry policies. They emphasized that what is most urgently needed to overcome the current crisis is leadership that actively mediates conflicts among stakeholders and forges social consensus. There is a pressing need for a unifying force that can build public support for structural reform and, based on that, achieve broad social and political compromise.

Jang Min, Senior Research Fellow at the Korea Institute of Finance, pointed out, "Widening economic and social polarization has weakened cohesion and strengthened group selfishness, which is a problem." Kim Kyungjin added, "Backward political and party operations, resulting in weak national policy and a loss of reform momentum, combined with a lack of innovation in major companies and industries, insufficient regulation for fostering new industries, and declining quality of national and lifelong education, are all core causes of the current crisis." Kwon Namhoon emphasized, "In many cases, value-oriented approaches have taken precedence over efficiency, and bold attempts have been blocked by various regulations, stakeholder conflicts, and a 'divide and share' mentality. These obstacles must be removed for the Korean economy to move forward."

Survey Participants (in alphabetical order)

▲Kang Sungjin, Professor of Economics at Korea University ▲Kwon Namhoon, President of the Korea Institute for Industrial Economics and Trade ▲Kim Kyungjin, Vice President of the Institute for Global Economics ▲Kim Jeongsik, Professor Emeritus of Economics at Yonsei University ▲Kim Hakgyun, Head of Research Center at Shinyoung Securities ▲Park Yangsoo, Director of the Sustainable Growth Initiative (SGI) at the Korea Chamber of Commerce and Industry ▲Lee Jaewon, Director of Economic Research at the Bank of Korea ▲Lee Jeongdong, Professor at Seoul National University Graduate School of Engineering Practice ▲Lee Insil, Director of the Korea Future Population Institute ▲Jang Min, Senior Research Fellow at the Korea Institute of Finance ▲Jeong Heesoo, Head of Hana Institute of Finance ▲Joo Won, Head of Economic Research at Hyundai Research Institute