SEOUL, April 4 (Korea Bizwire) — Private spending in South Korea fell to a record low last year amid gloomy employment prospects and rapid population aging.
The ratio of private spending to the country’s gross domestic product (GDP) reached 48.1 percent in 2017, down 0.6 percentage points from a year ago, the lowest since records began in 1970 at the Bank of Korea.
The figure remained around 70 percent in the early 1970s, with private spending falling to 53.8 percent in 2000.
After bouncing back to 55.5 percent in 2002, consumption began showing a downward trend, falling below 50 percent for the first time since 1988 in 2015 before plunging to new lows for the last three consecutive years.
South Korea’s private spending-to-GDP ratio is lower than other developed countries including the U.S., the U.K., Japan and Germany, where the figures all stood above 53 percent as of 2015.
In a report released last year, the National Assembly Budget Office also pointed out the ratio of South Korea’s private spending to its GDP has been declining rapidly compared to other developed countries.
Experts argue drops in private spending in the past were caused by the country’s push for economic growth such as high investment and trade volume, as opposed to the recent declines in private spending, which have been linked to the country’s aging population and slow job market.
Feeling uncertain about the future without a stable source of income, South Korean consumers aren’t opening their wallets.
Economists also believe the growing senior population who were born at a time with no pension system are focusing on saving, putting a strain on the country’s overall private spending.
“Recent falls in private spending shed light on the issues of job and income shortages. While the government is focusing on wage-led growth, the impact has yet to be felt,” said Kim Kwang-seok, a professor at Hanyang University.
“The fall in private spending shows how volatile the South Korean economy can be in the face of a global economic crisis,” Professor Kim added.
Ashley Song (email@example.com)