[Inside Chodong] Pledge No. 1: Reviving the Economy, the Answer Is Clear

Multiple Factors Behind Low Growth, Making Overcoming It Challenging
Demographic Shifts Are Key, Fundamental Issues Like Housing Costs and Educational Competition Must Be Addressed
Structural Reform Inevitably Brings Conflict, but Progress Begins with Determination

The "2025 Asia Financial Forum" hosted by Asia Economy the previous day addressed the topic "The Trap of Low Growth and the Leap Forward for the Korean Economy and Finance." The forum examined how the Korean economy can overcome low growth across various sectors. Although perspectives and solutions varied, the conclusion was unanimous: structural reform is the answer to fundamentally overcoming the phase of low growth.

However, structural reform is not easy from the outset. Because it requires attempts to change the already established order, conflict is inevitable. In particular, demographic changes are a key factor that accelerates low growth, and they are also especially difficult to resolve. Korea is experiencing population aging at a historically unprecedented speed. As of December last year, more than 20% of the total population was aged 65 or older, meaning the country had entered a super-aged society. While life expectancy has increased, the birth rate has declined, leading to more problems than anticipated under the current structure. Not only is the working-age population shrinking, but productivity is also declining due to aging, which together reduce growth potential. In addition, fixed costs such as health insurance are rising, leading to an increase in government debt. Even if the same amount of money is spent, the effectiveness decreases.

Various discussions and initiatives are underway to slow the pace of population decline. There is an emphasis on strengthening parental leave policies, introducing flexible work arrangements, and expanding childcare infrastructure, all aimed at creating an environment where people can have and raise children. Although progress is limited, it is encouraging that changes are being attempted. However, there is only a lukewarm approach to more fundamental issues, such as the structural challenges of high housing costs and intense educational competition, which discourage people from having and raising children. In this regard, the forum proposed easing the concentration in the Seoul metropolitan area by fostering non-capital regional hub cities and revising the university entrance system to strengthen regional selection. The key is to attempt structural reform. There needs to be active discussion using the proposed methods as leverage, followed by a process of reaching social consensus.

To make better use of the existing population, it is essential to increase the participation not only of women, whose economic activity rate is relatively low, but also of the elderly. Structural reform is also needed in this area. One issue that has recently been the subject of active discussion is extending the retirement age. Various methods have been proposed, including the idea that "rehiring after retirement" accompanied by wage system reform can provide sustainable labor and a stable source of income. To address the spread of elderly poverty, reforming the reverse mortgage system has also been suggested, based on the observation that Korea's elderly population has a particularly low proportion of financial assets and a high proportion of real estate assets.

Where should these difficult efforts begin? A former high-ranking government official I recently met answered that the most important thing for overcoming the phase of low growth is "the determination of the VIP for structural reform." The reason is that when the president is determined and constantly monitors an issue, it moves the ministries and ultimately brings about change. All major candidates running in the June 3 presidential election have made "reviving the economy" a key campaign pledge. However, it is disappointing that their proposed methods focus on stimulating the economy through large-scale fiscal spending and emphasizing the trickle-down effect through tax cuts. While fiscal spending may provide a temporary economic boost, it inevitably delays the timing of structural reform. The same applies to tax cuts. Without alternatives to the reduced tax revenue, more debt is the only result, and that debt will ultimately have to be repaid by future generations. The process of resolving conflict will not be easy, but if it is approached with determination, it will eventually become a source of pride to say, "I was the one who started that difficult task." Now is the perfect time to begin earnest discussions on structural reform.