Moody's: "Threats to South Korea's Economic Growth Are Low Birthrate and Aging Population"

International credit rating agency Moody's has identified population issues such as low birth rates and aging as threats to South Korea's economic growth.

According to Moody's recent report on South Korea's sovereign credit rating published on the 28th, Moody's diagnosed that "the long-term risk to South Korea's economic growth is the intensifying demographic pressure."

Moody's pointed out that South Korea's total fertility rate (the expected number of children a woman will have in her lifetime) fell to a record low of 0.78 last year, and the ratio of elderly population per 100 working-age people (old-age dependency ratio) continues to rise. According to Statistics Korea, the old-age dependency ratio in South Korea is expected to surge from 24.6 in the previous year to 100.6 by 2070.

Moody's stated, "Such demographic pressures will burden productivity and investment and cause fiscal problems," adding, "According to the United Nations, South Korea's working-age population increased by 11% between 1998 and 2017 but is projected to decline sharply by 24% between 2020 and 2040."

The fertility rate continues to decline as well. The total fertility rate in the first quarter of this year was 0.81, down 0.06 from the first quarter of last year. This is the lowest first-quarter figure on record. Considering the usual trend of decreasing births toward the end of the year, the total fertility rate for this year may fall below last year's 0.78.

Accordingly, Moody's expects South Korea's potential growth rate to slow to around 2.0% after 2025. It added, "Reforms to boost productivity could change South Korea's growth trajectory," and suggested, "If the government encourages immigration of young foreign workers, it could temporarily increase productivity and balance the old-age dependency ratio."