S. Korea`s growth potential drops to 3-pct range: report

SEOUL, Oct. 9 (Yonhap) -- South Korea's potential growth rate fell to the upper
3-percent range this year, a parliamentary report showed Friday, calling for the
government to step up efforts to secure long-term growth by increasing
investments and enhancing overall economic efficiency.
According to the report by the strategy and finance committee of the National
Assembly, South Korea's potential growth rate or the maximum possible rate at
which an economy can grow without triggering inflation fell to 3.8 percent this
year.
The projection is far lower than the government's claim that the nation's growth
rate potential remains in the upper 4-percent range.
The potential growth rate for Asia's fourth-largest economy once exceeded 8
percent in the mid-1980s thanks to favorable economic conditions at home and
abroad but it has fallen ever since, declining below 5 percent in the wake of the
1997-98 financial crisis.
The falling growth rate is attributed to decreasing contributions from labor and
capital towards economic growth amid a decline in population growth and stagnant
corporate investment.
The report comes amid growing optimism that the economy is rebounding at a
faster-than-expected pace from a steep downturn sparked by last year's financial
turbulence and resulting global recession.
Recently, the International Monetary Fund predicted that the Korean economy will
grow 3.6 percent next year after shrinking 1 percent this year. The growth rate
is projected to expand further to 4.5 percent in 2014, the fastest clip among
major advanced nations.
Experts place as much emphasis on securing longer-term growth potential as they
do on achieving a short-term rebound as the recent financial and economic crisis
offers a rare opportunity for the country to revamp its economic structure so as
to be better positioned to cope with similar challenges in the future.
kokobj@yna.co.kr
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