BOK warns pension and medical costs could double to 20 pct of GDP by 2050

South Korea’s combined spending on the national pension and medical care could nearly double to account for 20 percent of the country’s gross domestic product (GDP) by 2050 due to a shrinking workforce and rapidly aging population, the central bank said Tuesday.

In its latest research report, the Bank of Korea (BOK) said if all other conditions remain constant, spending on pensions and medical care will rise from around 10 percent of the GDP in 2025 to approximately 20 percent by 2050.

First, the BOK projected that the number of employed people will begin to decline around 2030. By 2050, the employment figure is expected to fall to just 90 percent of the 2024 level.

Specifically, the projected decline in employment will weigh heavily on GDP growth. A reduction in the number of workers directly implies a decline in labor input, a key factor of production.

Starting in the 2030s, labor is forecast to become a negative contributor to GDP growth. Even when accounting for capital input and productivity improvements, GDP growth is expected to hover around the mid-zero percent range by 2050, the report said.

Per capita GDP, a key indicator of individual welfare, is also projected to slow structurally.

As the share of the elderly population, who typically have lower labor market participation, continues to rise, the number of workers is expected to decline faster than the total population.

“As the population shrinks alongside accelerating aging, the South Korean economy may face substantial economic burdens,” said Lee Young-ho, a BOK official. “To mitigate the negative effects of a declining trend in employment caused by demographic change, it is essential to carry out structural reforms across the economy to boost both productivity and labor force participation.