Issue Productivity scenarios decide whether Korea avoids outright contraction

Summary

Because future efficiency gains are hard to predict, the authors run three productivity scenarios: a baseline converging to the recent 0.6 percent, an optimistic rebound to 0.9 percent on AI diffusion and structural reform, and a pessimistic 0.3 percent under trade conflict and stalled reform. Potential growth falls in every scenario, but for 2025 to 2030 it is 1.2, 1.5 and 1.7 percent in the pessimistic, baseline and optimistic cases, and for 2031 to 2040 it is 0.4, 0.7 and 1.1 percent. The optimistic path still grows slightly in 2050, whereas the pessimistic path brings contraction forward to the early 2040s. Holding prices and exchange rates at 2024 levels, per capita GDP in 2050 reaches about 53,000 dollars, 48,000 dollars or 44,000 dollars depending on the scenario. The gain from 36,113 dollars in 2024 is thus about 2.3 times larger in the optimistic case at 42.6 percent than in the pessimistic case at 18.9 percent.