Fitch Slashes Growth Forecast as Korea Ages Rapidly

  • By Kim Jung-hoon

    July 23, 2021 11:45

    Global rating firm Fitch has maintained Korea's sovereign credit rating at AA-, the fourth-highest, but slashed its growth outlook because the population is rapidly aging.

    Fitch lowered Korea's potential annual growth from 2.5 percent to 2.3 percent. The figure is the greatest increase in GDP that can be achieved without triggering inflation and a gauge of economic strength.

    The firm said Korea "faces medium-term growth pressures from its rapidly aging population." The proportion of Korea's population over 60 rose from eight percent in 2008 to 13 percent last year, and they now outnumber people in their 20s.

    Korea's total fertility rate or the number of children a woman can have in her lifetime, stood at just 0.84 last year, which is among the lowest in the world. This year it is expected to fall even further to 0.7. A country's economy is apt to shrink when there is a shortage of young workers and a rising number of retirees.

    The firm also noted that Korea's fiscal debt is rising, which "poses some risks to Korea's public finances, given spending pressures from an aging population." It added that the government seeks to offset these challenges through pump-priming measures, "but it is too early to assess how beneficial this will be." 

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