South Korea has become a poster child for the global artificial-intelligence surge, with giants such as Samsung Electronics and SK Hynix leading the memory-chip market. Workers at these firms are enjoying bonuses of roughly $400,000 and the KOSPI index is up almost 60% year-to-date.
Why household spending lags behind
Despite the export boom, retail sales remain close to 2019 levels. Goldman Sachs describes the situation as a "K-shaped cycle": corporate balance sheets thrive while private consumption stays soft. The firm attributes the gap to a rapidly ageing population.
Demographic headwinds
The United Nations reports that South Korea recorded just 0.8 births per woman last year, far below the 2.1 replacement rate. About one-fifth of the population is now over 65, and the post-war baby-boom generation is retiring as the labour force shrinks.
Goldman's analysis shows the country's dependency ratio, the share of children and elderly relative to working-age adults, is set to rise by 1.5 percentage points each year for the next decade, the fastest among the 70 economies the bank examined, even outpacing Japan's steepest ageing period.
Saving habits of the elderly
Older Koreans behave unusually when they retire: they save rather than spend. People in their sixties retain about 37% of their income, the highest saving rate of any age group, and those in their seventies save at rates comparable to people in their forties.
More than 60% of household net worth is tied up in non-financial assets such as real estate, the highest share among advanced economies, while financial assets equal only 100% of GDP, the lowest in Goldman's sample. Consequently, retirees are asset-rich but cash-poor; fewer than one-quarter could meet consumption needs using financial assets alone.
Reverse mortgages cover just 1.8% of homeowners older than 75, reflecting a strong desire to pass assets to heirs.
Potential impact on growth
Goldman estimates that a one-point rise in the dependency ratio cuts real private-consumption growth by about three basis points per year in most economies, but in South Korea the drag could be between ten and seventeen basis points. Their models suggest the ageing trend could shave as much as 25 basis points from annual consumption growth over the next decade.
Even if the economy maintains a 2% growth rate for the next twenty years, consumption growth would gradually weaken and eventually turn negative, according to the bank's long-term projections.
Policy responses and outlook
The government has introduced measures such as a marriage-support grant of up to 1 million won and a newborn incentive of 20 million won, while local authorities host matchmaking events with monetary rewards. Birth rates have risen only marginally, and any surge in births will not affect the labour force for at least twenty years.
Goldman recommends more immediate steps: unlocking housing wealth for seniors and ensuring a broader distribution of the windfall from the country's high-profit tech firms.
How South Korea navigates these demographic challenges will determine whether the AI boom translates into broad-based prosperity or remains confined to corporate balance sheets.