Goldman Sachs ties South Korea's weak consumption to rapid aging
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Goldman Sachs attributes South Korea's weak private consumption to rapid population aging. The country's fertility rate of 0.8 births per woman and a rising dependency ratio are suppressing household spending despite a booming chip sector. The report highlights a K-shaped cycle where corporate balance sheets thrive while retail sales remain near 2019 levels.
Key Facts
- South Korea's fertility rate was 0.8 births per woman last year, far below the 2.1 replacement level.
- Twenty percent of South Korea's population is now over the age of 65.
- The United Nations projects South Korea's dependency ratio will increase by 1.5 percentage points annually over the next decade, the fastest pace among 70 large and midsized economies analyzed by Goldman Sachs.
- Koreans in their sixties save 37% of their income, more than any other age group, according to Goldman Sachs.
- More than 60% of South Korean household net worth is tied up in non-financial assets like real estate, the highest share among advanced economies studied by Goldman Sachs.
Demographic Pressure
South Korea has one of the world's lowest fertility rates, reporting 0.8 births per woman last year, far below the 2.1 rate needed to keep population levels relatively stable. Twenty percent of Korea's population is now over the age of 65. The country's postwar baby boomers are retiring just as its fertility rate remains below replacement level, leading to a shrinking pool of working-age Koreans supporting the elderly. The United Nations projects Korea's dependency ratio—the number of children and elderly people relative to the working-age population—will increase by 1.5 percentage points a year over the next decade. That is the fastest pace among the 70 large and midsized economies Goldman analyzed, surpassing even Japan during its most intense period of aging from 2000 to 2015.
Retirement Spending Patterns
Older Koreans behave unusually when they retire: they don't spend. In Japan, Taiwan and the U.S., people tend to draw down their savings once they retire, but Koreans don't. Goldman found Koreans in their sixties save more than any other age group, retaining 37% of their income. Even those in their seventies save at rates similar to those in their forties. When incomes decline, Koreans are more likely to cut their spending or work more than to liquidate their assets.
Asset Composition
More than 60% of Korean household net worth is tied up in non-financial assets like real estate, the highest share among the advanced economies Goldman studied. Financial assets held by Korean households are only worth 100% of the country's 2024 GDP, the lowest level in Goldman's sample. That leaves Korean retirees asset-rich, but cash poor. Even among elderly households that have accumulated retirement savings, fewer than one-fourth could cover consumption needs with financial assets, Goldman researchers wrote. Reverse mortgages cover just 1.8% of homeowners older than 75, which Goldman observed partly reflects a strong desire among retirees to leave assets to their heirs.
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Goldman Sachs ties South Korea's weak consumption to rapid aging
