韩国央行-韩国经济展望（2025年5月）（英）_39页_5mb

Korea Economic Outlook (May 2025) Summary: Impact of Super-Aging on Monetary Policy Environment

Core Content

This report analyzes how population aging is reshaping the monetary policy environment in Korea and outlines the necessary structural reforms to address the long-term economic challenges. Korea has entered a "super-aged" society, with over 20% of the population aged 65 or older as of 2024, and is projected to have the highest elderly population share among OECD countries by 2045.

Main Findings

• Population Aging and Structural Shifts: Super-aging is causing structural changes in the monetary policy environment, including slower economic growth, lower real interest rates, and weaker financial stability.
• Growth and Real Interest Rates: Aging reduces labor supply and capital productivity, leading to lower growth and real interest rates. The report estimates that aging has reduced real interest rates by approximately 1.4 percentage points since 1991.
• Inflation Trends: Aging is expected to exert modest downward pressure on inflation (about 0.15 percentage points per year from 2025 to 2070). However, other structural changes like deglobalization, climate change, and post-pandemic experiences may offset this effect, leading to significant uncertainty.
• Financial Stability: Aging weakens financial institutions' soundness by lowering capital ratios and increasing default risk, especially for real estate-focused lenders. This could limit monetary policy flexibility and increase trade-offs between policy objectives.

Key Drivers of Structural Shifts

• Labor Supply Decline: Aging leads to a smaller working-age population, reducing potential growth.
• Savings Increase: Older populations save more, which puts downward pressure on real interest rates.
• Productivity Slowdown: Lower fertility rates reduce the pace of total factor productivity (TFP) growth, further contributing to lower growth and real rates.
• Capital Market Dynamics: Korea's open economy means real interest rates are influenced by global rates, and demographic changes could lead to convergence in interest rates.

Policy Implications

• Structural Reforms are Critical: Short-term monetary policies may not be sufficient to address the long-term structural shifts caused by aging. Reforms in the real and financial sectors are necessary to strengthen growth and financial stability foundations.
• Monetary Policy Challenges: The narrowing of policy space due to low real interest rates and weak growth could make it harder to balance inflation control and financial stability.
• Need for Coordination: Monetary policy should be coordinated with macroprudential measures to improve effectiveness in the evolving economic environment.

Structural Reforms to Address the Challenges

1. Labor Market Reforms

• Expand Female Labor Force Participation: Encourage more women to enter the workforce to offset labor shortages.
• Support Continued Employment of Older Workers: Extend working years for the elderly to increase labor supply and productivity.
• Improve Youth Employment and Social Conditions: Better employment, housing, and childcare conditions can help encourage fertility recovery.

2. Productivity Enhancements

• Promote Technological Innovation: Increase TFP growth to boost economic performance.
• Enhance Resource Allocation Efficiency: Support innovation and productivity across all sectors.

3. Financial Sector Reforms

• Reduce Reliance on Real Estate Financing: Diversify financial systems to reduce vulnerability to aging-related risks.
• Strengthen Monetary Policy Transmission: Broaden the base of demand for the Korean won and deepen foreign exchange markets to improve stability.

Expected Outcomes of Structural Reforms

• Growth and Real Interest Rates: If structural reforms are implemented, growth and real interest rates could rise significantly.
  • Fertility Recovery: A gradual return to the OECD average fertility rate could increase growth by 0.7 percentage points and real interest rates by 0.2 percentage points.
  • Elderly Employment Expansion: Extending the average employment period of older workers by five years could increase growth by 1.6 percentage points and real interest rates by 0.2 percentage points.
  • TFP Growth Increase: A 0.5 percentage point rise in TFP growth could boost growth by 0.7 percentage points and real interest rates by 0.2 percentage points.
• Monetary Policy Space: These reforms could expand the room for monetary policy by raising real interest rates and growth, and reinforcing financial stability.

Conclusion

Korea's rapid aging is a major structural challenge that affects growth, real interest rates, and financial stability. The report emphasizes that addressing these challenges requires long-term structural reforms in both the real and financial sectors. These reforms are expected to improve the foundations of the economy, enhance monetary policy effectiveness, and provide more flexibility in policy implementation.