Korea's global competitiveness ranking has plunged from 19th to 25th, according to the World Economic Forum on Wednesday. It was the worst ranking since 2004, when Korea was No. 29.
Credit rating firms Standard & Poor's, Moody's and Fitch all raised Korea's sovereign credit rating by one notch last year, citing the country's solid defenses against external economic shocks since the global financial crisis. And foreign investment into Korea has been rising despite investor jitters over other emerging economies. But its competitiveness still failed to impress the WEF.
Experts say that may seem odd but is an accurate reflection of the reality. While Korea did succeed in building a solid buffer against external economic shocks, it failed to overhaul its economic structure, which threatens a phase of low economic vitality and sluggish growth.
That is evident in the fact that Korea's economic growth is near-stagnant.
In the second quarter of this year, the country managed a 1.1 percent increase in GDP from the previous year after it had posted less than 1 percent growth since the first quarter of 2011. But it is unlikely to return to growth in the four-percent range. The economy grew just two percent in 2012 and is expected to grow some 2.7 percent this year.
"Two-straight years of GDP growth in the two-percent range mean that low growth has become the norm now," said Ha Joon-kyung at Hanyang University. "Without restructuring to create jobs, it will be difficult to emerge from the low-growth mode."