S. Korea's potential growth rate to hold at 2% range for 5 years: NABO

South Korea's average annual potential growth rate is expected to remain in the 2 percent range over the next five years, according to a new government forecast.

The National Assembly Budget Office released an economic outlook Wednesday projecting the country's average annual potential growth rate at 2.3 percent from 2026 to 2030.

Breaking down the figures by year, the potential growth rate is estimated at 2.2 percent this year before rising to 2.3 percent annually from 2027 through 2030.

The office attributed the outlook to competing forces: increased AI investment and productivity improvements are expected to raise the contributions of capital and other factors to potential growth, while a shrinking population will weigh on labor's contribution.

Driven by growth in equipment investment and the productive capital stock, capital's contribution to potential growth is projected to edge up from 0.68 percentage points in 2026 to 0.71 percentage points in 2030.

Labor's contribution, by contrast, is forecast to deteriorate — from minus 0.14 percentage points in 2026 to minus 0.2 percentage points in 2030 — as the population shrinks and average working hours decline.

Meanwhile, real GDP growth is projected to average 2.7 percent annually from 2026 to 2030. The office said improved income conditions driven by strong semiconductor exports are expected to gradually spread to other sectors of the economy, boosting the contributions of domestic demand and the private sector.

The office also flagged risks, warning that deepening concentration in the semiconductor sector could prevent the benefits of economic growth from spreading broadly, leaving gains confined to select industries and groups. It added that it remains unclear whether strong exports and a current account surplus will translate into greater domestic investment and job creation as hoped. "Wisdom and effort are needed to head off potential problems and manage the situation carefully, so that the widening income and growth gap between semiconductor-benefiting industries and those left behind does not escalate into new social conflict," the office said.