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Economy

South Korean population on cusp of steep decline

Nearly half of population will be elderly by 2065, statistics agency estimates

South Korea's fertility rate fell below 1 in 2018.   © Reuters

SEOUL -- South Korea's declining fertility rate could push down its population starting next year, bringing the demographic tipping point closer than expected, the government reported Thursday.

The most pessimistic scenario shows the population peaking at 51.65 million in 2019, then sliding back to the 1972 level of 33.65 million in 2067. Seniors 65 and older would constitute 46% of the population in 2065 under the medium-growth scenario, making South Korea the grayest developed nation.

Statistics Korea normally releases population estimates every five years. The last projections came out in 2016, with the next due in 2021. But it announced in late February that the total fertility rate fell to 0.98 last year -- one of the world's lowest. The figure denotes the average number of children a woman bears in her life.

The news prompted the earlier-than-scheduled update on the population estimate. The data released in 2016 saw the population peaking in 2023 under the most pessimistic scenario, but the current findings move this up by four years.

Just 14% of South Korea's population was 65 and older in 2017 -- roughly half of Japan's share based on United Nations estimates from 2015. This placed South Korea at the lower end in the Organization for Economic Cooperation and Development. The percentage of working-age people between 15 and 64 came to 73% in 2017, putting South Korea atop the OECD.

But in the medium-case scenario, the working-age share shrinks to 46% in 2065. This would push South Korea to last place among OECD nations, even below Japan's 51% ratio.

The rapid graying of South Korean society is directly connected to contemporary barriers to child-rearing. The unemployment rate for 15- to 29-year-olds came to 9.5% last year, underscoring a persistent problem.

More people cannot afford to get married. A 2015 survey showed 58% of men aged 20 to 44 unwed, along with 48% of women in that age group. Many who do tie the knot hesitate to have kids, fearing education costs.

The looming population pressures will weigh heavily on economic activity. South Korea's potential growth rate ranges between 2.7% and 2.8%, but "it could potentially sink to the 1% range as soon as 2030," said Hong Joon-pyo of the Hyundai Research Institute. Many in South Korea see the baby bust as a bigger risk than a currency crisis, the Chosun Ilbo newspaper reported.

The government spent 117 trillion won ($102 billion at current rates) between 2016 and 2018 on birthrate measures. But the program lacked specificity and not only failed to lift the fertility rate toward the target of 1.5, but also could not halt its decline.

President Moon Jae-in's administration unfurled a policy road map last December that includes further subsidies covering costs for children, free pediatric care until elementary school, and extra compensation for parental leave.

Even these might not be enough. "At this rate, it will be difficult to maintain the pension system," Yonsei University economist Sung Tae-yoon said. "We will need a drastic change to our current policies, such as the intake of immigrants."

Hong echoed this sentiment, saying that "to raise economic growth potential, we will need to create a friendly working environment for women, relax immigration policies, and further develop a friendly investment environment that includes deregulation and creating new industries."

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