By Hwang Ga-yeon
Calls are growing that Korea should prepare itself against a drop in its potential economic growth rate, with a warning that a "gray rhino" could be haunting Asia's No. 4 economy.
Lee Keun, the director of the Center for Economic Catch-up, said Monday Korea is facing a slowing potential growth rate due to such problems as the country's household debt. He added these are "gray rhinos which can deprive the economy of its long- and mid-term growth momentum."
A gray rhino describes a situation when large and obvious economic problems are ignored.
His remarks are drawing attention as the country seems to feel euphoric thanks to the third-quarter growth rate of 1.4 percent from a year ago, the highest in seven years. As a result, Korea is likely to achieve 3 percent growth this year for the first time since 2014.
Lee, who makes the point in his new book about the Korean economy, seems to be pessimistic about both the short-term and long-term outlooks of Korea Inc. Thirty other experts joined him to analyze the macroeconomic flow in the book.
Lee, also a professor at Seoul National University, noted Korea's potential economic growth rate was over 5 percent in the early 2000s, but it will fall to an average of 2.8 percent between 2016 and 2020.
"On this trajectory, the country's potential growth rate may fall nearly 1 percent in the next decade," Lee said.
Prof. Rue Duk-hyun at Chung-Ang University said the Korean economy resembles that of Japan's in the late 1990s, just before the "Lost Decades." He urged Korea to delve into such grave issues as demographic change, real estate markets and youth unemployment to avoid the advent of the "gray rhino."
The three factors have been identified as major reasons to explain why the Japanese economy struggled for two decades. Japan still fails to deal with the aftermath of its long-lasting slump.
In his new book, Lee and other experts analyze keywords such as the Fourth Industrial Revolution, aging society, financial reform, fintech, online-only banks and cashless society. The book will be available beginning this week.
Fintech refers to various applications and business opportunities based on convergence between information technologies and financial services. Based on its advanced info-tech foundation, Korea regards it as one of the country's cash cows for the next generation but thus far it has not achieved tangible results.
Lee earned his Ph.D. from California State University and received the Schumpeter Prize in 2014 for his previous publication "Schumpeterian analysis of economic catch-up." He is also editor of Research Policy and Seoul Journal of Economics.
Hwang Ga-yeon is a Korea Times intern.