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Samsung Electronics’ semiconductor plant in Pyeongtaek, Gyeonggi Province \/ Courtesy of Samsung Electronics <\/p>\n
A semiconductor export boom is underpinning Korea’s economic growth, but deeper structural weaknesses continue to weigh on its long-term trajectory, economists and market analysts said Sunday. <\/p>\n
Their view is that policy measures are needed to ease the economy’s heavy reliance on semiconductors, while long-term efforts should focus on boosting growth in the face of a rapidly aging population and low birth rates.<\/p>\n
According to the latest data from the Organization for Economic Cooperation and Development (OECD), the country’s potential growth rate is estimated to decline to 1.71 percent this year from 1.92 percent in 2025. It is projected to decline further to 1.57 percent next year.<\/p>\n
The OECD expects the quarterly rate to slow to 1.52 percent in the fourth quarter of 2027, pointing to a continued gradual slowdown.<\/p>\n
Potential growth refers to the maximum level of output an economy can sustain by fully utilizing labor, capital and other resources without triggering inflation. It is widely seen as a measure of an economy’s underlying strength.<\/p>\n
The OECD data showed that Korea’s potential growth rate has been on a steady decline since 2012, when it stood at 3.63 percent. <\/p>\n
The data also highlight a widening gap with the United States. Since 2023, Korea has trailed the world’s largest economy in potential growth, declining from a difference of 0.03 percentage points to a projected 0.38 percentage points in 2027.<\/p>\n
Recent headline growth, supported by a strong semiconductor cycle, has overshadowed the Asian economy’s falling growth potential and other underlying weaknesses.<\/p>\n
Bank of Korea (BOK) data showed real gross domestic product (GDP) grew 1.7 percent in the January\u2013March period from the previous quarter. Exports were the main driver, rising 5.1 percent, led by IT products such as semiconductors. The country’s two chip heavyweights, Samsung Electronics and SK hynix, posted record-high earnings in the first quarter.<\/p>\n
Analysts warn that the economy’s heavy reliance on a single sector could expose it to heightened volatility.<\/p>\n
“The first-quarter growth was largely driven by semiconductors, masking weakness in other sectors,” said Yang Jun-seok, a professor of economics at the Catholic University of Korea. “Amid concerns over an AI bubble, if the global demand for chips weakens, Korea’s broader economy could face a significant shock.”<\/p>\n
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Finance Minister Koo Yoon-cheol, left, and Bank of Korea Gov. Shin Hyun-song arrive for a meeting at the Korea Federation of Banks’ headquarters in Seoul, Thursday. Yonhap<\/p>\n
Kim Dae-jong, a professor of business administration at Sejong University, said structural reforms were needed to reduce the economy’s dependence on a single industry. <\/p>\n
“An economy led almost entirely by semiconductors is not sustainable,” Kim said. “Beyond external risks tied to the chip cycle, ongoing labor disputes<\/a> at Samsung Electronics could weigh on the company’s output and deal a blow to the broader economy.”<\/p>\n Kim added that broader reforms and policy support are needed to revitalize both traditional industries such as steel and petrochemicals and emerging sectors including defense and artificial intelligence. <\/p>\n Policymakers broadly agree that structural reform is key to reversing the decline in potential growth. <\/p>\n With low birth rates, a rapidly aging society and slowing productivity weighing on the economy, they stressed the need for comprehensive measures to strengthen long-term growth capacity.<\/p>\n