South Korea must brace for slow growth, invest in AI to survive, experts warn

Korea Herald

29-05-2025

A financial risk strategist and an AI scholar on Thursday warned that South Korea must brace for a prolonged low-growth era, urging businesses and individuals to prepare for structural changes in the economy — from the fragmentation of global trade to the explosive rise of artificial intelligence.
Speaking at the Global Business Forum hosted by The Korea Herald in Seoul, Cho Bong-hyun, executive vice president of IBK Insurance, said Korea is entering a structural downturn that may resemble Japan's lost decades and warned that the country can no longer rely on past growth formulas to stay competitive.
'We are not just facing a cyclical slowdown,' he said. 'We are entering a new normal of low growth, and it will be long-term.'
Cho pointed to persistent inflation in the US, the likelihood of extended high interest rates and a slowing Chinese economy as external risks. But he emphasized Korea's internal vulnerabilities as even more urgent. 'Domestic demand is weak, household debt remains high and the housing market is unlikely to rebound even with monetary easing,' he said. 'Asset prices are entering a correction phase.'
On the structural front, Cho highlighted the looming demographic crisis. "Starting in 2025, Korea will see a steep decline in its working-age population. This will shake the foundations of our pension, labor and financial systems,' he said.
'It may sound pessimistic,' Cho added, 'but preparing for the worst-case scenario is wiser than clinging to outdated assumptions.'
To respond to these complex transitions, Cho urged Korean businesses to embrace what he called 'dynamic balancing,' the ability to alternate between outward expansion and internal consolidation depending on global and domestic conditions.
'Now is not the time for blind expansion or excessive risk aversion,' he said. 'We need companies to be nimble, and capable of both advancing outward and consolidating inward, depending on shifting conditions.'
Yet flexibility alone, he said, is not enough. 'In a time of low growth, innovation isn't just a choice. It's the only way forward.'
Meanwhile, Choi Jae-boong, a mechanical engineering professor at Sungkyunkwan University, said the next three years would be decisive for Korea's future in AI.
'AI development is accelerating like a revolution,' Choi said. 'After three years, the pace will slow. You must act now.'
He cited the explosive growth of US-based AI firms, noting that the combined market capitalization of the top seven US AI companies surged from $13 trillion in 2024 to over $17 trillion in 2025.
'In contrast, Korea's largest company is worth only $400 billion,' he said. 'We must ask ourselves — are we part of the future or not?'
Still, Choi said Korea has a unique strength: its world-class hardware and manufacturing capabilities. He pointed to Samsung Electronics and SK hynix as key suppliers of high-bandwidth memory chips used in AI training, including models such as ChatGPT.
'These firms are already powering the AI engines of today,' he said. 'No AI runs without hardware, and that hardware often starts in Korea.'
He added that while countries like China may have scale, they lack the geopolitical trust necessary to be a reliable partner in global supply chains. 'The US needs partners who are both technologically capable and politically aligned. Korea fits both criteria,' Choi said.
To seize that opportunity, Choi emphasized, Korea must escape its bureaucratic mindset.
'Too often, innovation is paralyzed by questions like: 'Who will take responsibility if it fails?'' he said. 'But while we hesitate, others are already building.'