S. Korea's growth potential poised to decline amid steady drop in exports

South Korea's growth potential has dipped to the mid-2 percent range and may further decline due to the fast aging of the population that is beginning to affect its labor force, a local think tank suggested Sunday.

According to the Hyundai Research Institute, the country's growth potential has steadily dwindled from 7.3 percent in the early 1990s to 5.6 percent in the late 1990s and 3.2 percent in the 2011-2015 period.

The report said the growth potential of Asia's fourth-largest economy has dropped to 2.5 percent for the 2016-2020 period, and that it may further decline to the 1 percent range.

The report comes amid an apparent slowdown in the growth of Asia's fourth-largest economy. The South Korean economy unexpectedly contracted 0.4 percent from three months earlier in the first quarter.

The Bank of Korea earlier projected that the economy would grow 2.2 percent this year, sharply slowing from a 2.7 percent on-year expansion in 2018.

The report cited an imminent cut in the number of workers as one of the major reasons for the country's deteriorating growth potential, along with sluggish investment and lack of new growth engines.

South Korea's working population, or people aged between 15 years and 64 years, is set to begin shrinking this year, one of the problems facing the country as the result of years of record low birthrates.

South Korea is still one of the world's fastest aging societies despite becoming an aged society in 2017, when the proportion of its people aged over 65 years reached over 14 percent of its entire population.

The country is projected to become a super-aged society in 2025, with the proportion hitting the 20 percent mark.

It also highlighted the need to boost research and development spending to secure new growth engines, noting semiconductors and automobiles have continued to be the country's largest export items for more than two decades. (Yonhap)