South Korea's rapid aging could undermine AI-driven economic gains
South Korea's AI boom has boosted exports and the stock market, but retail sales remain stagnant. Goldman Sachs attributes this to the country's rapidly aging population, as elderly Koreans save more and spend less, with wealth tied up in real estate. The dependency ratio is rising faster than in any other large economy.
Goldman Sachs’s report highlights a stark contrast between South Korea’s booming chip-driven corporate sector and its stagnant household consumption. While Samsung and SK Hynix workers enjoy large bonuses and the KOSPI has surged nearly 60% this year, retail sales remain near 2019 levels. The bank attributes this “K-shaped cycle” to demographics: with a fertility rate of 0.8 and 20% of the population over 65, Korea’s dependency ratio is rising faster than in any other large economy analyzed.
Korean retirees uniquely save rather than spend, retaining 37% of income in their sixties. Over 60% of household wealth sits in real estate, and financial assets are just 100% of GDP—the lowest among advanced peers. Reverse mortgages cover only 1.8% of homeowners over 75, reflecting a strong bequest motive. Goldman models show aging could cut annual consumption growth by up to 25 basis points over the next decade.
This demographic drag may undermine the broader benefits of Korea’s AI-led export boom, as wealth concentrates in corporations while aging households tighten spending. Younger workers and small businesses reliant on domestic demand could face prolonged stagnation, even as export sectors thrive. The pattern may also strain public finances, as fewer working-age adults support a growing elderly population. If consumption weakens further, Korea’s economic resilience could erode, potentially affecting global supply chains and regional stability—though policy responses, such as pension or housing reforms, could mitigate these pressures.