Fertility rate and growth rate both stagnate at 0%

As the low fertility phenomenon persists, the total fertility rate is projected to decrease to 0.65 in 2025, followed by a slight rebound to 0.68 in 2026, according to future population estimates from Statistics Korea. Two years ago, it was predicted that the rate would hit a low of 0.7 next year, but the decline has intensified, and the recovery has been delayed. The total population, currently at 51.71 million, is expected to decrease to 40 million by 2040. In 2019, Korea became the 7th country to join the '3050 Club,' representing powerful nations with a per capita income exceeding $30,000 and a population surpassing 50 million. However, considering the population size alone, it is poised to be ousted from this club in 17 years.

The decline in the productive population and the increase in the dependency ratio due to low fertility and aging are key factors dampening the growth engine. According to Statistics Korea, in 35 years, each working person aged 15 to 64 will have to support one person. Experts believe 'shrinkonomics,' in which the overall economy loses vitality and contracts, has already begun. This year, the growth rate has remained in the 0% range for three consecutive quarters. The Korea Development Institute predicted that the potential growth rate would decline to 0.5% by 2050, but even this is an optimistic figure assuming that productivity would increase by an average of 1% per year. The Korea Economic Association recently issued a grim forecast, suggesting that the potential growth rate will drop to 0% in the 2030s and turn negative by 2047.

Various factors, including income, housing, competition, education, and social culture influence the fertility rate. This is why a comprehensive approach is necessary, involving efforts to create more quality jobs by fostering new growth industries, reforming the dual labor market structure, and reducing competition by decentralizing metropolitan areas. Despite the establishment of the Basic Plan to Address Low Fertility in 2006, family-related government expenditures directly impacting the fertility rate, such as childcare allowances and childcare service support, are only at 64% of the average of OECD member countries relative to the size of the economy. The period of parental leave utilized is merely 17% of the OECD average. Although the government claims to have allocated 380 trillion won to address low fertility, young couples raising children do not perceive the impact. There is a pressing need to eliminate budgets unrelated to childbirth and concentrate on projects with demonstrated policy effectiveness.

Even if the fertility rate successfully rebounds, it is anticipated to increase only to a range between 0.82 and 1.34 by 2072. Social systems tailored to the period of population growth, such as education, defense, and urban policies, need to be reorganized to withstand the shock caused by a rapid population decline. Most importantly, it should serve as a catalyst for pension reform, allowing individuals to remain in the labor market for extended and more productive periods. This preparation is essential to address the decline in the working-age population. Additionally, there is a need to reassess pension fiscal estimates by moving away from overly optimistic forecasts, such as the assumption of a fertility rate of 1.19 in 2040.