Seoul: Bank of Korea (BOK) Governor Rhee Chang-yong cautioned on Tuesday that South Korea's potential growth rate might descend to the zero percent range by the 2040s. He emphasized the urgent need to efficiently allocate financial resources to enhance the nation's growth potential. Rhee delivered these remarks during a speech at a BOK symposium, co-hosted with the Korean Finance Association in Seoul.

According to Yonhap News Agency, Rhee highlighted the decline in the country's potential growth rate, noting it was around 5 percent in the early 2000s but has recently slipped below 2 percent. He warned that if this trend persists, the rate could plummet to the zero percent range by the 2040s. Rhee attributed this decline to low birthrates and rapid population aging, which have diminished the working-age population. Additionally, he noted that corporate investment and innovation have not sufficiently countered these demographic trends.

Rhee also criticized the "inefficient" allocation of resources, stating it has hindered the flow of capital into high-productivity sectors. He underscored the crucial role of finance as infrastructure that reallocates limited resources to the most efficient sectors, thereby driving innovation and productivity growth.

In its latest economic outlook released last month, the BOK increased its growth projection for this year by 0.1 percentage point to 1 percent. However, for 2026, the forecast predicts a 1.8 percent expansion. Despite this upward revision, the growth forecast for this year remains significantly below the estimated potential growth rate of around 1.8 percent, which represents the maximum pace at which the economy can expand without causing inflation.