OECD Forecasts South Korea's Potential Growth Rate to Fall Below 1.5% Next Year
Potential Growth Rate Falls Below 1.5% for the First Time Ever
There are projections that South Korea's potential growth rate will fall below 1.5% for the first time next year.
According to data released by the Organisation for Economic Co-operation and Development (OECD) on June 3, 2026, South Korea's potential growth rate is estimated to drop from 1.85% in 2025 to 1.66% in 2026, a decline of 0.19 percentage points.
For next year, the expected figure is 1.52%, representing a further decrease of 0.14 percentage points. The OECD also analyzed that the potential growth rate for the fourth quarter of next year (compared to the same period in the previous year) will be just 1.46%. The OECD provides quarterly figures only for the fourth quarter.
This is the first time since the OECD began reporting these figures that South Korea's estimated potential growth rate has fallen below 1.5%. The potential growth rate refers to the growth rate of potential Gross Domestic Product (GDP). Potential GDP is defined as the maximum level of output that a country can achieve by utilizing all its production factors—including labor, capital, and resources—without triggering inflation.
A declining potential growth rate indicates that the economy is effectively weakening. According to the latest OECD estimates, South Korea's potential growth rate fell below 3% for the first time in 2016, dropping from 3.62% in 2012 to 2.93% in 2016, and dipped below 2% last year.
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This contrasts with the recent rapid improvement in South Korea's economic conditions. On June 3, 2026, the OECD raised its forecast for South Korea's real GDP growth rate for this year from the previous 1.7% to 2.6%, an upward revision of 0.9 percentage points. This reflects the strong export performance, particularly in semiconductors and other information technology (IT) products, which led to a real GDP growth rate of 1.7% in the first quarter of this year. While the semiconductor boom is boosting short-term growth, it does not mean that the structural limitations of the South Korean economy have been resolved. However, experts note that if the semiconductor boom continues on a structural basis, there is still a possibility for a dramatic rebound in the potential growth rate.
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