■ As in Japan’s case, the slowdown in productivity growth has been a major driver of declining capital returns in Korea, leading to a shift from domestic to overseas investment.

- Looking ahead, a shrinking working-age population will weaken labor input and domestic capital returns, further accelerating the shift toward overseas investment.

- A productivity slowdown directly reduces GDP and also shrinks the domestic capital stock, amplifying the total impact on GDP to about 1.5 times the direct effect.

- In Japan, where productivity and demographic shifts occurred about twenty years earlier than in Korea, slower productivity growth led to a marked loss of economic dynamism and greater reliance on investment income from abroad.

■ Therefore, restoring growth momentum will require sustained structural reforms that boost productivity.

- If the productivity slowdown persists, adverse effects may broaden, particularly for those who depend heavily on labor income.

- This will require building an environment that enables innovative firms to enter and unproductive firms to exit, alongside a more flexible labor market that supports economy-wide productivity growth.

※ The shift to overseas investment arises from declining domestic productivity and helps offset the resulting loss in national income. It would therefore not be advisable to restrict it by policy.

※ Since the current account surplus is equivalent to net overseas investment, an increase in the surplus should be interpreted with caution.