Lee Chang-yong "Potential growth rate in the 0% range in the 2040s… Finance must reallocate resources"

Lee Chang-yong, Governor of the Bank of Korea, forecast that Korea's potential growth rate would fall to the 0% range in 15 years. He stressed that efforts to raise productivity are urgent and that finance must play the role of reallocating limited resources.

He said this on the 9th in welcoming remarks at a policy symposium held with the Korean Financial Association at the Bank of Korea annex on Namdaemun-ro, Seoul. The theme of the symposium was 'The Role of Finance in Raising Potential Growth.' He said, "The potential growth rate, which was around 5% in the early 2000s, has fallen to below 2% recently, and it is highly likely to fall to the 0% range in the 2040s," adding, "This is because corporate investment and productivity innovation that could cushion the situation of a declining labor force due to rapid low birthrates and aging have been insufficient."

He emphasized the role of finance in raising corporate productivity. He said, "Finance is a key infrastructure that reallocates limited resources to the most efficient places, leading to innovation and productivity improvements," and added, "The role of finance is more important than ever."

At the event, Cho Seong-wook, former chairman of the Fair Trade Commission (Professor, Seoul National University Business School), gave a presentation titled 'Enhancing Trust in the Capital Market and Strengthening Its Role for Corporate Growth and Innovation.' Cho said, "Our capital market does not provide investors with sufficient trust and investment attractiveness," and pointed out, "This is causing investors to turn their attention to real estate or overseas assets."

He cited the decline in trust as due to incidents such as fund scandals and conflicts of interest at financial companies, which have reduced households' indirect investment and confidence in the capital market. Cho warned, "As a result, household asset portfolios have become excessively concentrated in real estate and deposits," adding, "If the capital market fails to distinguish between growing and declining industries and allocate capital to firms with high productivity, corporate innovation investment and the economy's overall growth potential could be further weakened."

Reporter Kang Jin-gyu josep@hankyung.com