[Population Extinction Hitting Industry] Declining Population Slows Advanced Countries' Pursuit

Global Economic Share Falls Below 2%
Per Capita GDP Catch-Up Rate Halves Every 5 Years

Due to low birth rates, aging population, and population decline leading to reduced labor force and investment contraction, it is projected that South Korea's share in the global economy will not exceed 2% and will gradually decrease. This analysis assumes no dramatic improvement in gross domestic product (GDP) or productivity growth rates, nor a significant rise in the value of the Korean won, ultimately attributing the impact to population decline.

According to the "2024 South Korea Economic Outlook" published by Professor Lee Geun, a distinguished professor at Seoul National University, South Korea's share of the global economy peaked at 2% in the mid-2000s and has been gradually declining since. Due to the exchange rate increase in 2022, the share dropped from 1.9% in 2021 to 1.69% in 2022, and it is estimated to continue declining to 1.67% in 2023 and 1.65% in 2024.

South Korea's pace of catching up in per capita GDP is also rapidly slowing down. Professor Lee is an expert in economic catch-up theory, which studies how latecomer countries catch up with advanced economies. According to his research, South Korea's speed of catching up in per capita GDP halves every five years, meaning it takes about 50 years for per capita income to reach 80% of that of the United States. In terms of per capita income, South Korea closed the gap with the U.S. by 2 percentage points over five years, from 68.5% in 2018 to 70.9% in 2023, which is about half the pace compared to the 4 percentage points gained from 64.7% in 2012 to 68.5% in 2017.

Professor Lee identified low birth rates as the fundamental cause. In 2021, the Korea Economic Research Institute analyzed that a decrease of 0.25 in the total fertility rate could lead to a 0.9 percentage point drop in GDP. Looking at recent fertility trends, a 0.25 decrease in total fertility rate corresponds to 100,000 fewer newborns. Additionally, 0.9% of GDP in 2022 amounts to approximately 19.4 trillion KRW. Therefore, a decrease of 100,000 births implies that future GDP will shrink by 19.4 trillion KRW annually.

Calculating this value per newborn results in 190 million KRW. Assuming conservatively that a newborn impacts the national economy upon reaching working age (15?64 years), the future GDP increase effect per newborn is estimated at 9.7 billion KRW. Applying a social discount rate of 4.5% to evaluate this in present value terms, the current value of the GDP increase effect per newborn is estimated at 2.1 billion KRW. This can be interpreted as the national economic value decreasing by 2.1 billion KRW each time a newborn is lost now.

This content was produced with the assistance of AI translation services.