[Editorial] A gloomy forecast for Korea in 2075

The government, legislature, companies and individuals must help build a sustainable country for our future generation.

Korea’s economy dragged down by the world’s lowest birth rate and fastest aging will be smaller than Nigeria’s after 20 years and the Philippines’ after 50 years, according to a recent global economic outlook by Goldman Sachs. In the nominal gross domestic product (GDP) scale of the International Monetary Fund (IMF), Korea in 2020 was 10th largest after Italy and Canada. Nigeria was 26th and the Philippines 31st. The U.S. investment bank predicted China to become the world’s largest economy by 2050, followed by the United States, India, Indonesia and Germany.

The population will become a determining factor behind economy. Korea suffers the worst birth rate and fastest aging. Its total fertility rate last year stood at a mere 0.81 percent, the world’s lowest. Due to lacking births, aging against total population inevitably has become the fastest. Real GDP from 2050 is expected to fall behind Japan which has been grappling with demographic risks earlier than Korea.

Goldman Sachs estimated Korea’s growth rate at the average 2-percent range in the 2020s. Its GDP would fall 0.1 percent in the 2060s and 0.2 percent in the 2070s. Korea was the sole economy in Goldman Sachs’ report on 34 nations to be performing in the negative territory over the long term. Fortunately, its per capita income will exceed $100,000 by 2075 on par with the levels of France and Canada.

State think tank Korea Development Institute (KDI) presented a grimmer outlook. The economy is rapidly losing growth potential, painting tough life for the future generation. Potential growth — the rate an economy can sustain at full capacity and employment without causing too much inflation — is primarily determined by labor, capital input, and total factor productivity (TFP). Labor and capital input could be zero by 2040 due to Korea’s fast population thinning, according to KDI. Korea’s TFP is also sinking due to setbacks in smooth entry and exit by companies to the market and increased social trade cost owing to conflict and distrust among the society.

The Future Labor Research Council, an expert group, released a set of recommendations on reforming the labor market by lifting the retirement age from current 60 to help sustain economically-active population. A presidential committee on low birth and aging society also has gone beyond the usual proposal of improving working environment for females to suggest an easing of Korea’s immigrant policy and extension of retirement age. All the tasks cannot be easy as they can cause conflicts among generation and across the society. But since the problems are crystal clear, solutions are laid out. The government, legislature, companies and individuals must help build a sustainable country for our future generation.