NABO warns of severe impacts from population decline

The National Assembly Budget Office (NABO), a parliament body for analyzing and evaluating issues related to the national budget in South Korea, recently warned of the potential impact that the ongoing population decline could have on education, military defense, and employment. It painted a worse scenario than that painted by the government earlier.

In its latest report published on Wednesday, NABO calculated Korea’s total population in 2040 based on the assumption that the fertility rate would remain at the current level beyond 2026. The estimated population was 49.16 million, falling below the 50-million threshold for the first time.

The figure is 1.03 million lower than the median estimate of 50.19 million, projected by Statistics Korea in its 2021 population projections.

The biggest impact of the population decline will be on the school-age population, according to the report. NABO expects the number of those aged 6 to 17, which was 5.38 million in 2022, to plunge by 50.3 percent to 2.68 million in 2040. The report noted that the number of elementary students per class will drop to 10 from 21.1 during the period, and similar contractions will be evident at middle and high schools.

The decline in the younger male population will impact military force numbers and defense capabilities, the report added. New recruits will fall to 101,000 in 2040 from 186,000 in 2022, making a decline of 43.5 percent. Smaller military forces are expected to hit economies that rely on military bases for their income.

Gangwon Institute, a research and analysis institution dedicated to economic issues in Gangwon Province, estimated that the departure of the 6th Infantry Division based at Cheorwon County, Gangwon Province, will reduce the gross regional domestic product by 6.5 percent in the county, with a reduction of 128.7 billion won ($98.1 million) in the region’s income.

The NABO report also warned that with accelerating demographic shocks, Korea’s gross domestic product (GDP) growth will be close to zero (0) percent starting from 2040. If the current fertility rate remains unaddressed, the GDP growth rate will fall to 0.9 percent in the 2040s from 1.5 percent in the 2030s.

The report added that labor shortage will slow down GDP growth, with the number of employed people in 2070 estimated to be 18.64 million, down 33.6 percent from 2022. The country’s debt is expected to worsen, with the national debt-to-GDP ratio soaring from 49.2 percent last year to 192.6 percent in 2070.

NABO concluded the report by calling on government agencies to take a systematic approach to population decline. “The capabilities and staff across relevant units need to be integrated to establish a comprehensive body in charge of dealing with the demographic crisis.”