Senior citizens gather at Tapgol Park in downtown Seoul, Oct. 2. Yonhap

Korea's potential growth rate is projected to remain at 2 percent for two consecutive years, down 0.4 percentage point compared to three years ago, according to data released Sunday.

According to data submitted by the finance ministry to the National Assembly, the OECD forecasts Korea's potential growth rate to remain at 2 percent for 2024. This figure was 2.4 percent in both 2020 and 2021, decreased to 2.3 percent in 2022, and then fell to 2 percent last year, where it continues to stand this year.

The potential growth rate refers to the pace of increase in gross domestic product (GDP) — the highest level of output a country can achieve by fully utilizing its labor, capital, and resources without triggering inflation. It is generally observed that countries with higher income levels tend to experience slower growth.

Despite the downward trend, Korea's growth rate remains higher than that of any G7 country except the U.S., which stands at 2.1 percent. However, other major economies are experiencing upward trajectories, indicating that Korea's growth could decline significantly in the near future without decisive policy interventions.

For example, the U.S. overtook Korea for two consecutive years starting in 2023, driven by an influx of foreign talent and advancements in its IT industry. Its potential growth rate increased from 1.9 percent in 2020 and 2021 to 2 percent in 2022 and 2.1 percent last year.

Other major advanced economies also reported increases.

The U.K.'s potential growth rate rose from 0.9 percent in 2020 to 1.2 percent last year, stabilizing at 1.1 percent this year. Similarly, Germany's rate increased from 0.7 percent in 2020 to 0.8 percent this year.

Multiple forecasts suggest that Korea's potential growth rate could even fall into the 0 percent range by the 2040s.

The Korea Chamber of Commerce and Industry (KCCI) forecast the rate to drop to 1.2 percent by 2030 and fall further to 0.7 percent by 2040. The National Assembly Budget Office (NABO) expects both real GDP growth and potential growth to gradually decline, reaching 2 percent by 2028.

"This gradual decline reflects shrinking growth potential, primarily driven by a slowdown in labor and capital input expansion," the NABO wrote.

Experts identify the decline in the working-age population as the primary factor constraining Korea's potential growth. The proportion of the population aged 15 to 64 is projected to plummet from 71.1 percent in 2022 to 45.8 percent by 2072.

"A declining birthrate and an aging population not only reduce labor supply but also hinder the recruitment of young, skilled talent essential for global leading companies, posing a threat to the nation's innovation capacity," Kim Cheon-koo, a research fellow at KCCI said.

"Without actively competing to attract specialized talent for future growth drivers, it will be difficult for Korea to revive its slowing total factor productivity and potential growth rate," Kim added, recommending policies to expand immigration of skilled talent, support female researchers, and promote industries with strong cross-sector innovation potential.