New figures released this week show that the fertility rate in Korea fell again last year to a new all-time low of just 0.72 births per woman. The decline in the fertility rate will weigh heavily on the country’s productive potential and is a key reason why we expect trend GDP growth to slow sharply over the coming decades.
Meanwhile, government spending in Korea is scheduled to rise by just 3.2% next year. Weak government spending will add to the economic drags coming from the downturn in property and subdued consumer spending. Our forecast is for GDP growth of 2.0% this year and next, which is below consensus.
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