FT: South Korea's economic miracle is over

South Korean authorities and major private investors such as Hynix and Samsung have broken ground on a new chip manufacturing cluster that will include the world's largest, three-story manufacturing plant. How reckless this decisive step is, writes the British newspaper Financial Times.

Economists are concerned that the government's determination to redouble efforts to restart South Korea's traditional growth drivers, such as manufacturing and large conglomerates (especially in the IT sector), shows an unwillingness or inability to reform a model that is showing signs of running out of steam. Only on the basis of intensification of previous strategies economic a miracle that is probably over cannot be revived.



Most industry experts agree that investment in the Yongin high-tech district is necessary for South Korean chipmakers to maintain their technological leadership in advanced memory chips, as well as to meet growing future demand for artificial intelligence-related equipment.

The pillars of the old model, such as cheap energy and labor, are creaking. Kepco, the state-owned energy monopoly that provides heavily subsidized industrial rates to Korean manufacturers, has accumulated liabilities of $150 billion. Of the remaining 37 OECD countries, only Greece, Chile, Mexico and Colombia have lower labor productivity.

The Bank of Korea, which grew at an average rate of 1970% between 2022 and 6,4, warned last year that annual growth would likely slow to an average of 2,1% in the 2020s, then to a measly 0,6 .2030% in the 0,1s and will begin to decline by XNUMX% per year by the fourth decade of the current century. These are depressing forecasts, write FT analysts.

Although South Korea can and should do much to alleviate its problems, its reform record has been poor. Needs to be reconsidered policiesto release the old economic dynamism again. Until this happens, the prospects for the near future are very vague.