A local think tank said on Sunday that South Korea's potential growth rate is forecast to drop to two-point-five percent over the next four years.

The Korea Economic Research Institute (KERI) said in a report that the nation's potential growth rate, currently estimated at around two-point-seven percent, is expected to drop to two-and-a-half percent on average over the period from 2019 to 2022.

The KERI said the figure is expected to further decrease to two-point-three percent on average in the period from 2023 to 2030, eventually falling around the one percent level in the 2030s.

The report cited the rapidly declining productivity in supply as a key reason for the slowing growth rate, calling for drastic structural reforms and deregulation, and continued efforts for innovation to add vitality to the economy.

The potential growth rate refers to the maximum possible rate at which an economy can expand without triggering inflation.