ASIATODAY.ID, NEW YORK – South Korea is confronting one of the fastest aging populations in the world. Citizens live longer than in most countries, while fertility rates remain among the lowest globally. Today, one in five Koreans is aged 65 or older—more than triple the share in the 1990s.
“This demographic shift is not just a statistic; it has real consequences for the economy,” said Rahul Anand, Assistant Director at the IMF’s Asia-Pacific Department quoted on January 28, 2026.
“Older populations consume less, and without reforms, Korea could face declining real consumption and rising debt pressures.”
IMF estimates indicate that spending on pensions, healthcare, and long-term care could rise to 30–35 percent of GDP by 2050.
“If economic growth slows due to aging and no offsetting measures are taken, debt could reach 90–130 percent of GDP,” Anand added, “posing serious long-term fiscal sustainability risks.”
Structural and Fiscal Reforms Are Key
Hoda Selim, Senior Economist at the IMF, emphasized the need for both structural and fiscal reforms.
“Structural reforms such as AI adoption, greater labor force participation, and more efficient resource allocation could create additional fiscal room to support the elderly. But even with these reforms, debt could still surpass 100 percent of GDP due to uncertainty and risks.”
Beyond structural changes, Selim noted that fiscal reforms are essential to create budget space for rising spending without straining public finances:
Increasing Efficiency: “Policymakers should review and simplify tax exemptions, including for personal and corporate taxes, and reduce inefficient spending on local governments and SMEs,” she said.
Pension Sustainability: Parliament has recently strengthened the National Pension Service by raising contribution rates.
“Further reforms are needed to maintain sustainability while ensuring fair and adequate benefits,” Selim added.
Medium-Term Fiscal Framework: “A clear fiscal anchor and strong medium-term planning can make fiscal policy more predictable and transparent, while allowing responses to economic shocks,” she said.
With the right mix of structural and fiscal reforms, Anand concluded, “South Korea can navigate the challenges of an aging population without undermining fiscal stability, ensuring the government can care for its elderly citizens while remaining resilient to global economic shocks.” (AT Network)
Follow Us at Google News and WA Channel