Photos taken on May 26, 2016 show a mobility scooter sitting in front of a rice field in Gangwi about 200 kilometers south of Seoul. By 2030, a quarter of all Koreans will be over 65 years old, and the overall population is expected to peak at around 52 million before entering a period of steady decline. This so-called “silver tsunami” poses a major challenge to Asia's fourth largest economy as the population of young working ages decreases and the costs of caring for older people escalate. And in remote rural communities like Gangwi, about 200 kilometers southeast of Seoul, this trend is exacerbated by the departure of young people into the cities due to work.
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South Korea is staring at demographic freight trains. Known as one of the “four Asian tigers” due to the meteor economic rise from post-war poverty, the country warns it is facing a demographic cliff that could stall growth within 20 years.
In 2024, the Bank of Korea predicted that the country's rock fertility rate will be one of the factors driving the country's long-term recession by the 2040s.
Another study by the Korea Development Institute in May said that demographic changes continue to drag on potential growth and could be near zero by the 2040s. The forecast shows that South Korea's economy could sign a contract in a neutral scenario by 2047.
South Korea's birth rate is currently at 0.748 in 2024, slightly rising from a record low of 0.721 in 2023. This is compared to an organization with an average of 1.43 economic cooperation and development in 2023.
For South Korea, a fertility rate of 0.72 is to have around 36 children at the current level for every 100 people per Korean, reducing the workforce for generations. Experts say it will slow down productivity and speed of growth.
The miracle of the “Miracle of the Han River”?
If technological innovation fails to offset this decline, South Korea will see a “sustainable economic slowdown,” Lee In-Sil, the future Lee Sil of the Korean Peninsula Population Institute, told CNBC.
And that's not because there's no attempt. The country deployed the package after a package of newlyweds' support measures to have children, such as baby bonuses and cash rewards. According to a 2024 paper in the Journal of Medical Ethics, Seoul has spent more than $270 billion over the past 16 years in incentives to promote childbirth.
In 2023, Seoul wrote the idea that if there were more than three children before the age of 30, a man would be exempt from forced military service.
However, such efforts had little impact in a country that was hailed as a “miracle of the Han River” due to its rapid rise after the war. “I don't think there is a way that population policy can effectively raise the fertility rate in Korea in a substantial way,” Nicholas Eberstadt, political economist at the American Enterprise Institute, told CNBC.
People will cycle along a track with the Singapore city skyline in the background on June 27, 2025.
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South Korea's total fertility rate had risen slightly in 2024, but “Champagne coke should not be popped,” and South Korea rose slightly as Eberstadt is still well below the 2.1 replacement rate. He pointed out that the size of the desired family in Korea is still below the 2.1 replacement rate. This means that the TFR may rise, but it will not reach the 2.1 figure.
The impact of pensions
The reduced labor force will also be narrowing down its pension system. In March, South Korea passed its first pension fund reform in 18 years, extending the drainage of its state pension funds to 2071.
Among the four major pension schemes in Korea, military, private school employees, civil servants and national pensions – military pensions and civil servant pensions have already run out, Lee said.
Current reforms will see a structure in which younger generations pay higher premiums while receiving higher benefits.
The small draft pool has defensive implications. The number of South Korean active forces fell 20% from 690,000 in 2019 to about 450,000. The South Korean military has been strengthened by 28,500 US troops, and Seoul has a mutual defense treaty with Washington.
South Korea is still officially at war with North Korea, as the 1953 Korean War ended with a ceasefire rather than a peace treaty. North Korea boasts one of the world's largest resident forces, with approximately 1.23 million staff.
There's no reason to be pessimistic
Despite the obvious outlook for Asia's fourth-largest economy, some analysts have warned against despair.
Lee, who was also a former director of the National Bureau of Statistics, said the economy could find ways to adapt.
“When an economy faces a recession, we usually respond with various efforts to increase productivity through innovation, immigration policies and other measures to prevent further decline,” she said.
AEI's Eberstadt also pointed out that South Korea can maintain and even increase prosperity despite aging and shrinking. He pointed out the 1970s. The 1970s pointed to the fear of resource shortages increased as the world's population surged and questions emerged about how to feed it.
In 1968, the book “Population Bomb,” co-authored by former Stanford Professor Paul Erich and researcher Anne Erich, predicted global hunger and rates of rise as the population grew.
But 50 years later, the world “is richer, more educated, better, better-farmed, more bred, more prosperous, more thriving, far less absolute poverty than when the world was smaller,” Eberstadt said.
Lee from Kppif said she is confident that a groundbreaking solution will emerge, given the rapid changes in the South Korean government's policy and the evolution of public awareness in recent years.
Few people would have stoked that the Korean War could accomplish what South Korea had today when the Korean War stopped in 1953.
“Humans have their own adaptability,” he added. “This is a very different kind of challenge, but I don't think that a close past record suggests that betting on the Korean population is smart money.”