Korea’s aging population to sap fiscal health: Fitch
The fast-paced aging of South Korea’s population is likely to undermine the fiscal health of Asia’s fourth-largest economy in the long run amid soaring debt, credit ratings agency Fitch Ratings said Monday.
The aging population, coupled with a declining fertility rate of fewer than one child per woman, could leave Korea exposed to higher risks as rising government spending could become a less effective means of boosting nationwide productivity.
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Fitch urged Korea to carry out midterm measures to keep the nation’s fiscal health intact. Otherwise, Fitch’s sovereign rating for Korea could drop from its current “AA-” on rising public debt.
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“Over the longer run, a persistent rise in public debt could pose greater risks for the rating, amid higher government spending pressures associated with an ageing population,” Jeremy Zook, director of sovereigns at Fitch Ratings, wrote in a note Monday.
“The long-term debt trajectory will depend, in part, on how the government’s spending affects productivity and potential economic growth.”
This shows contrast with Fitch’s view toward the current levels of government fiscal spending, which the rating agency expects to buttress the nation’s recovery from the COVID-19 pandemic in the near future.
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