> ## Content Index > Fetch the complete content index at: https://www.bexus.info/llms.txt > Use this file to discover other available public pages before exploring further. # National Assembly Budget Office: 'Potential Growth Rate at 2.3% over Next 5 Years, Same as Before'… Diverges from Lee's 'Rebound for First Time in 40 Years' - URL: https://www.bexus.info/20261024-news-123-en/ - Published: 2026-10-24T08:07:57.000Z - Updated: 2026-10-24T10:48:10.000Z - Description: On the 30th of last month, the National Assembly Budget Office projected the potential growth rate at 2.2% in 2026 and an annual average of 2.3% from 2026 to 2030, stating that it is "expected to remain at the same level as before." At a senior aides meeting on the 22nd, President Lee Jae-myung cite - Author: Alfred Kim - Tags: english, 서울, Seoul SEOUL The National Assembly Budget Office (NABO) projected South Korea's potential growth rate at 2.2% in 2026 and an annual average of 2.3% for the 2026–2030 period, stating that it "is expected to maintain the same level as before." President Lee Jae-myung, presiding over a senior aides meeting at Cheong Wa Dae on the 22nd, noted that the International Monetary Fund (IMF) had forecast a two-year consecutive rise in South Korea's potential growth rate, calling it "the first time in 40 years since the mid-1980s, an era of high growth." There is a 0.7 percentage point gap between the parliamentary body's projection and the "3% potential growth rate" unveiled by the government in July under its "3·4·5 Vision." ## NABO Projects Potential Growth Rate at Annual Average of 2.3% for Next 5 Years, Calling It "Same Level as Before" NABO published its "2027 NABO Economic Outlook: 2026–2030" on September 30\. The press release stated, "The potential growth rate is expected to be 2.2% in 2026 and an annual average of 2.3% for 2026–2030." It continued, "Over the next five years, it is expected to maintain the same level as before, recording an annual average of 2.3%." The press release was prepared by the Macroeconomic Analysis Division. NABO (led by Chief Ji Dong-ha) stated that it forecasts the economy for the next five years across four areas—expenditure, production, income, and sustainable growth—and uses the report to support the National Assembly's review of budgets and accounts. NABO broke down the factors underpinning the potential growth rate, writing: "The contribution of capital and other factors to potential growth is projected to increase due to rising AI-related investments and productivity improvements, while the contribution of labor is expected to decline due to population decrease and other factors." In the same outlook, real gross domestic product (GDP) growth was projected at 3.5% in 2026 and 2.7% in 2027\. The annual average real growth rate for 2026–2030 was set at 2.7%. NABO forecast nominal GDP growth at 22.0% in 2026 and 7.3% in 2027\. The GDP deflator growth rate was seen slowing from 17.8% in 2026 to 4.4% in 2027\. The growth rate of nominal gross national income (GNI) was projected at 21.8% in 2026 and 7.1% in 2027\. NABO anticipated that per capita GNI would surpass 60 million won for the first time in 2026 and approach 70 million won in 2027. The assessment of the medium-term growth path maintained the same framework as a year ago. NABO stated this time that "the expected real GDP growth path is projected to maintain a level higher than the trend growth rate during the forecast period before gradually converging toward the trend growth rate." The September 2025 outlook also stated that the real GDP growth path would "slightly exceed the potential growth rate during the forecast period before converging to the potential growth rate level." ## President Cites IMF Outlook, Calling It a "Historical Turning Point" President Lee brought up the IMF outlook first at the senior aides meeting held at Cheong Wa Dae on the 22nd. According to a policy briefing summarizing remarks from Cheong Wa Dae, President Lee said, "Amid growing public expectations for surpassing 3% in real growth and achieving $40,000 in per capita national income this year, the International Monetary Fund projected that our potential growth rate will rise for two consecutive years." Regarding this forecast, President Lee said, "It is the first time in 40 years since the mid-1980s, an era of high growth." He added, "Unlike back then during the 'three-low' boom, this outlook is even more meaningful as it came amid unfavorable conditions such as high oil prices stemming from the Middle East war and the global supply chain crisis." President Lee attached significance to it, saying, "The potential growth rate, which had fallen by nearly 1% with every change of administration, will mark a historical turning point under our government." He continued, "We must use this trend as a priming water to advance toward larger, sustainable, and balanced growth." At the same meeting, President Lee also mentioned the downsides of growth. "Even if the economy grows, structural changes in industry are narrowing youth employment channels, and the gap between exports and domestic demand is not closing," President Lee said. He stated, "We must further strengthen the competitiveness of advanced strategic industries such as artificial intelligence and semiconductors, and concentrate fiscal and policy resources on sectors where recovery is sluggish." President Lee directed, "I ask that the secured fiscal capacity be deployed sufficiently as needed for expanding youth jobs, housing supply, and revitalizing domestic consumption." He urged, "Please gather our strengths so that all economic actors can evenly enjoy the opportunities for our economy's new leap forward and the people can feel it firsthand." The Ministry of Economy and Finance announced on the 13th the results of the IMF's October World Economic Outlook, stating that South Korea's growth forecast for this year rose to 3.3%, up 0.7 percentage points from July. The 2027 forecast was revised up by 0.3 percentage points to 2.8%. In the same outlook, global growth was projected at 3.1% in 2026, while advanced economies were forecast to grow 2.1%. The Ministry of Economy and Finance's release did not include the IMF figure for South Korea's potential growth rate cited by the president. The ministry stated in the release, "We plan to make all-out efforts to ease polarization, stabilize public livelihoods, and engineer a rebound in the potential growth rate." ## A 0.7 Percentage Point Gap from Government's '3% Potential Growth Rate' Target The government announced its "Economic Growth Strategy for the Second Half of 2026" at a Cabinet meeting on July 14\. There, the Ministry of Economy and Finance raised its real growth forecast for this year from 2.0% to 3.0%. The government presented the "3·4·5 Vision"—standing for a 3% potential growth rate, top-4 export powerhouse status, and $50,000 in per capita national income—as national growth targets. The government announced it would leap toward an "irreplaceable Republic of Korea" through three mega-projects: semiconductors, artificial intelligence (AI) data centers, and physical AI. This strategy also included large-scale investment plans. The government announced it would invest 800 trillion won to build a southwestern semiconductor cluster and 550 trillion won to establish an 8.4 GW AI data center. A plan to deploy 790 trillion won in policy financing for the climate sector over the next 10 years was also included. The government said it would nurture over 200,000 young professionals and create over 200,000 quality jobs across both the private and public sectors by 2030. NABO's forecast for the annual average potential growth rate for 2026–2030, released two and a half months later, is 2.3%. This is 0.7 percentage points lower than the 3% target presented by the government. Although real growth for this year exceeds 3%—with the government projecting 3.0% and NABO projecting 3.5%—the indicator the president highlighted this time as "the first in 40 years" is the potential growth rate, not real growth. ## NABO's Potential Growth Rate Estimate for This Year Changed from 1.8% to 2.2% in Six Months Releasing the "2026 NABO Economic Outlook" on March 27, NABO stated, "The potential growth rate for 2026 maintained the previous outlook's level of 1.8%." In the same document, the real GDP growth forecast for this year was 2.0%. NABO explained at the time that despite sluggish construction investment, the economy would record higher growth than the previous year "as facility investment and exports show strength, centered on semiconductors, which are expected to experience a boom." Six months later, in its September outlook, NABO put the 2026 potential growth rate at 2.2%. The real growth forecast rose from 2.0% to 3.5%. While the estimate for this year's potential growth rate rose by 0.4 percentage points, the real growth forecast jumped by 1.5 percentage points. The divergence is even larger compared with the outlook from a year ago. In the "2026 NABO Economic Outlook: 2025–2029" released on September 30, 2025, NABO stated, "The annual average potential growth rate for 2025–2029 is projected at 1.8%, down 0.3 percentage points compared to the previous five years (2020–2024)." At that time, NABO noted, "As the contributions of labor and capital to potential growth are expected to slow, expanding growth potential based on factor inputs will be limited." Real growth was projected at 1.0% for 2025 and 1.9% for 2026, with an annual average real growth rate of 1.8% expected for 2025–2029\. In the span of one year, the same institution's five-year average real growth projection shifted from 1.8% to 2.7%, and its five-year average potential growth projection changed from 1.8% to 2.3%. ## Labor Contribution Declines, Concerns over Semiconductor Concentration Remain In this latest outlook as well, NABO anticipated that the contribution of labor to the potential growth rate would decline "due to population decrease and other factors." A year ago, it pointed to a slowdown in the contributions of both labor and capital; this time, it revised the capital contribution upward due to AI investment. NABO also highlighted economic imbalances. The press release stated, "Concerns also persist that as concentration in the semiconductor sector intensifies, the fruits of economic growth may fail to spread and instead concentrate in select industries and brackets." It also called it uncertain whether current account surpluses would translate into domestic investment and jobs as expected. NABO noted the possibility that the gap between industries benefiting from semiconductors and those that do not could widen. It added that even if nominal GNI increases significantly, "there is expected to be a time lag in its transmission to household income." A similar point was made in the March outlook. At the time, NABO stated that while nominal GNI in 2026 was "projected to increase by 6.1% driven by improved profitability in export industries such as semiconductors and a rapid recovery in corporate earnings," "gross household disposable income is projected to increase by only 4.6%," indicating that household income improvement would be more moderate than that of the nation as a whole. Risk factors were also cited. NABO stated, "Various uncertainty factors coexist, including rising long-term U.S. interest rates and the resulting potential deceleration in AI investment, trade environment uncertainties surrounding U.S. tariff policy, and intensifying competition with China in major export markets." AI investment, which drove up the capital contribution, is listed simultaneously among the risk factors. In its March outlook, NABO analyzed the impact of the Middle East war by dividing it into a baseline scenario and a prolonged scenario. The press release at the time noted, "Disruptions are occurring in the supply of Middle Eastern crude oil due to the blockade of the Strait of Hormuz." It added, "In the event of an early normalization, achieving a 2.0% growth rate is highly likely, but if it becomes prolonged, there is a risk of growth falling an additional 0.2 to 0.3 percentage points." ## Real Growth Projected to Slow to 2.7% Next Year NABO projected that real growth, at 3.5% this year, will slow to 2.7% in 2027\. The press release explained that real growth in 2027 would decline from 3.5% to 2.7%, and that growth in the GDP deflator would also moderate "(17.8% → 4.4%) as the extent of improvement in terms of trade narrows." The press release also noted that "the growth path is expected to slow heading into the second half." NABO linked next year's domestic recovery to fiscal policy. The press release stated, "With an expansionary fiscal stance underpinning improved real income conditions, domestic demand is highly likely to show a recovery trend centered on facility investment and private consumption." The growth contribution of the government sector was expected to "maintain a level similar to 2026." For 2027, the number of employed persons was projected to increase by 180,000 (0.6%), with nominal wages rising 6.5%. The nominal wage growth rate for 2026–2030 was projected at 4.2%. The IMF called for structural reforms and fiscal consolidation during its annual consultation a year ago. Concluding the 2025 Article IV consultation with South Korea in November 2025, the IMF Executive Board projected South Korea's growth at 0.9% in 2025 and 1.8% in 2026\. The Board stated, "Structural reforms to boost productivity and lift potential growth were underscored." The Board also noted, "Directors emphasized resuming fiscal consolidation as growth returns to potential." At the time, citing a negative output gap, the Board welcomed the current fiscal accommodation. Concurrently, it recommended structural fiscal reforms centered on taxes, spending efficiency, and pensions, alongside the introduction of a medium-term fiscal anchor to safeguard long-term fiscal sustainability. As structural reform tasks in the productivity sector, it cited tackling the productivity gap between large and small firms, streamlining regulation, sustaining innovation, and harnessing artificial intelligence. In the labor sector, it called for "reducing labor market duality and rigidity." The IMF projected that the negative output gap would gradually narrow "starting 2026." ## President Pledged Six Major Structural Reforms a Year Ago, Saying "Must Be the First Government" At the 40th Cabinet meeting held at the Yongsan Presidential Office on September 2, 2025, President Lee said, "Until now, whenever an administration changed, the potential growth rate has continued to fall. It has typically trended down by about 1 percentage point per administration." President Lee said, "Unless we lift the potential growth rate that has plummeted into the 1% range back up, any policy will inevitably end up as a flash in the pan." President Lee stated, "Our government must become the first government to reverse the downward trend of the potential growth rate." At the 15th senior aides meeting on November 13 of the same year, President Lee said, "The biggest task facing the Republic of Korea right now is to rebound the potential growth rate." In a briefing, spokesperson Kim Nam-joon presented "six major areas: regulation, finance, public sector, pensions, education, and labor" as targets for structural reform. In its "2026 Economic Growth Strategy" on January 9 this year, the government set an economic growth target of 2.0%. The government stated, "To engineer a rebound in the potential growth rate and strengthen national competitiveness, we will pursue becoming one of the world's top two in semiconductors, top four in defense, and top three in artificial intelligence (AI)." ## Sources (KST) - Korea Policy Briefing (Cheong Wa Dae) · 2026-10-22 · President Lee: "A New Leap Forward for Our Economy… Going All Out So the People Can Feel It" · https://m.korea.kr/news/policyNewsView.do?newsId=148974140&pageIndex=1&cateId=&repCode\_P=&smenu= - National Assembly Budget Office Press Release · 2026-09-30 · NABO Publishes "2027 NABO Economic Outlook: 2026–2030" · https://www.nabo.go.kr/ko/notice/releasesView.do?idx=9457 - National Assembly Budget Office Press Release · 2026-03-27 · Publication of "2026 NABO Economic Outlook" · https://www.nabo.go.kr/ko/notice/releasesView.do?idx=9207 - National Assembly Budget Office Press Release · 2025-09-30 · NABO Publishes "2026 NABO Economic Outlook: 2025–2029" · https://www.nabo.go.kr/ko/notice/releasesView.do?idx=8924 - Korea Policy Briefing (Ministry of Economy and Finance) · 2026-10-13 · IMF Forecasts 3.3% Economic Growth for South Korea This Year… Up 0.7%p from July · https://www.korea.kr/news/policyNewsView.do?newsId=148973388&pWise=sub&pWiseSub=C1 - Korea Policy Briefing (Ministry of Economy and Finance) · 2026-07-14 · 3% Potential Growth, Top 4 Exporter, $50,000 National Income… 'Inaugural Year of Economic Great Leap Forward' · https://www.korea.kr/news/policyNewsView.do?newsId=148968126 - Korea Policy Briefing · 2026-01-09 · Government Targets 2% Economic Growth for Korea This Year… Achieving 'Inaugural Year of Economic Great Leap Forward' · https://www.korea.kr/news/policyNewsView.do?newsId=148957785 - Korea Policy Briefing · 2025-09-02 · President Lee: "Must Be the First Government to Reverse the Downward Trend in Potential Growth" · https://www.korea.kr/news/policyNewsView.do?newsId=148948537 - Korea Policy Briefing · 2025-11-13 · President Lee: "Structural Reform in 6 Key Areas… Must Rebound the Potential Growth Rate" · https://www.korea.kr/news/policyNewsView.do?newsId=148954707 - International Monetary Fund (IMF) · 2025-11-24 (local time) · IMF Executive Board Concludes 2025 Article IV Consultation with Republic of Korea · https://www.imf.org/en/news/articles/2025/11/21/pr-25385-republic-of-korea-imf-executive-board-concludes-2025-article-iv-consultation