5 minWorld
South Korea’s aging population may blunt its AI boom, Goldman Sachs warns
A Goldman Sachs report finds that South Korea’s record-low birth rate and elderly Koreans’ unusually high saving rates could keep the wealth from its AI-driven chip boom from reaching ordinary households.
South Korea has emerged as one of the biggest winners of the artificial intelligence boom, home to Samsung Electronics and SK Hynix, the world’s two largest memory chip manufacturers. Chip workers have received bonuses of around $400,000, and the KOSPI benchmark index is up nearly 60% this year. Yet a new report from Goldman Sachs warns that this wave of corporate wealth may not reach ordinary households, largely because the country is aging too quickly.
Despite surging exports and factory investment driven by chip demand, retail sales remain close to their 2019 levels. Goldman economists describe the situation as a “K-shaped cycle,” in which corporate balance sheets thrive while private consumption stays soft. Their explanation points to demographics: South Korea reported just 0.8 births per woman last year, far below the 2.1 rate needed to keep the population stable, and roughly one in five Koreans is now over the age of 65.
The country’s postwar baby boomers are retiring at the same time that fertility remains below replacement level, shrinking the pool of working-age Koreans who support the elderly. The United Nations projects that Korea’s dependency ratio — the number of children and elderly relative to the working-age population — will rise by 1.5 percentage points per year over the next decade. That is the fastest pace among the 70 large and midsized economies Goldman analyzed, surpassing even Japan during its most intense aging period from 2000 to 2015.
Older Koreans also behave unusually when they retire: they do not spend. In Japan, Taiwan and the United States, retirees tend to draw down their savings, but Koreans in their sixties save more than any other age group, retaining 37% of their income. Even Koreans in their seventies save at rates similar to those in their forties. More than 60% of Korean household net worth is tied up in non-financial assets like real estate, the highest share among advanced economies in Goldman’s study, while financial assets held by households are worth only 100% of the country’s 2024 GDP, the lowest level in the sample.
That leaves Korean retirees asset-rich but cash poor. Goldman researchers found that even among elderly households that have accumulated retirement savings, fewer than one-fourth could cover consumption needs with financial assets. When incomes decline, Koreans are more likely to cut spending or work more than to liquidate assets. Reverse mortgages cover just 1.8% of homeowners older than 75, reflecting a strong desire among retirees to leave assets to heirs.
Taiwan, another AI boom winner, offers a contrast. Despite similarly severe aging pressures, Taiwanese households have a much larger financial cushion, with net financial assets totaling five times GDP, compared to just one times GDP in Korea. That allows older Taiwanese consumers to spend more.
The savings propensity could become a growing drag on Korea’s economy. Among major economies Goldman studied, a one percentage point increase in the dependency ratio reduces real private consumption growth by around 3 basis points a year. In Korea, the hit is between 10 and 17 basis points. One Goldman model suggests that rapid aging could shave as much as 25 basis points from annual consumption growth over the next decade, and long-term modeling shows consumption growth gradually weakening and eventually turning negative even if the economy maintains 2% growth over the next two decades.
Korean officials have tried national and local measures to reverse falling birth rates, including a “marriage support grant” of up to 1 million won ($725) for couples who marry and an extra 20 million won ($14,500) per newborn. Local governments have hosted matchmaking events, some offering monetary rewards for couples who marry after meeting. Birth rates are rising very slightly, but any babies born now will not reach working age for at least two decades. Goldman economists instead suggest more immediate solutions, such as helping elderly Koreans unlock their housing wealth and better distributing the windfall from the country’s super-profitable tech firms.
