[THE INVESTOR] Korea’s potential economic growth rate could fall to as low as 1.45 percent by 2050, Korea Economic Research Institute president Kwon Tae-shin warned on July 5.

Speaking at a forum held at the National Assembly, Kwon said that Korea’s potential growth rate has plunged since the 1990s, and that a potential growth rate of 1.45 percent is possible by 2050. 

“One of the structural problems with the Korean economy is falling potential growth rate,” Kwon said. Saying that Korea’s potential growth rate was above 7 percent in the 1990s, but dropped to 3.34 percent last year, he said that the country could be at risk of prolonged slowdown similar to that experienced by Japan. 

“Rising (household) debt has fanned the possibility of chronically low domestic consumption. The rapid rise of household debt (caused) inadequate spending by the public, leading to negative effects on domestic consumption,” Kwon said.

According to Kwon, population aging and real estate market slowdown are similar to issues experienced by Japan.

Kwon also said that Korea’s rigid labor market was bringing down the country’s competitiveness saying that low labor market efficiency was detrimental to corporations.

By Choi He-suk (cheesuk@heraldcorp.com)