Video transcript
The Korean economy is recovering from the global inflation shock, and GDP growth is supported by strong exports.
GDP growth is expected to pick up to 2.6% in 2024.
Surging investment in artificial intelligence is renewing demand in Korea’s semiconductor industry.
To mitigate the risks from geopolitical tensions and disruptions in foreign markets, Korea should diversify its trade and value chains.
Inflation is projected to decline to 2.5% in 2024, which will allow monetary policy to ease.
The Korean fertility rate is the lowest in the world. The population is projected to halve by 2082 and the old-age dependency ratio is expected to surge.
To counteract the declining birth rate:
- Adjust the childcare system to better meet the needs of working parents
- Expand parental leave to the entire workforce
- Improve work-life balance
- Strengthen sanctions for workplace discrimination
- Alleviate the burden of high housing and education costs for young families
Though its debt-to-GDP ratio is low compared to most other OECD countries, improving the fiscal framework would help Korea reduce deficits and prepare for an ageing population.
To adapt to inevitable ageing:
- Phase out the seniority-based wage system and company-specific mandatory retirement ages
- Raise the statutory retirement age by linking it to life expectancy
- Provide upskilling and re-skilling opportunities for older workers
- Break down labour market dualism by relaxing employment protection while expanding social insurance enrolment
- Facilitate high-skilled migration, and better integrate low-skilled foreign workers
The share of workers in small and medium-sized enterprises (SMEs) is the highest in the OECD. SME productivity is only about one-third of large companies, despite high government subsidies.
To boost SME productivity:
- Remove regulatory barriers to encourage fair competition in the domestic market
- Consolidate, co-ordinate and better target SME subsidies
Korea’s economy is one of the most energy-intensive in the OECD. It has pledged to reduced greenhouse emissions by 40% in 2030 and reach net zero in 2050.
Approximately three quarters of Korea’s greenhouse gas emissions are capped by the emissions trading scheme.
To reach net zero:
- Tighten the emissions limit on the emissions trading scheme
- Implement market-friendly regulatory reforms in the electricity sector
To learn more, read our Economic Survey of Korea 2024.