There are signs that South Korea’s economy will have a strong 2020, according to recent economy data. The Nikkei Asian Review, for example, stated that “South Korea’s economy is set to rebound slightly in 2020 thanks to easing trade war tensions and expansive fiscal and monetary policy.” However, the article continued that “tight regulations and rising labor costs are likely to limit growth over the next 12 months.”
Notably, the country could face issues in the coming years due to an aging population. “However, a bigger concern over the coming decade is a looming demographic ‘time bomb’ stemming from the country’s fertility rate, one of the world’s lowest,” as noted by the article. It continues, “But hanging over the entire economy is the aging population. The country’s fertility rate — the average number of babies born per woman during her lifetime — dropped to a record low 0.88 in the third quarter.”
Interestingly, the country’s economy is slated to see growth over the course of the year, which is based on data from December. “The Bank of Korea projected in December that gross domestic product would grow 2.4% next year, up from an estimated 2.0% rise in 2019. Private sector economists are making similar forecasts, with JPMorgan seeing a 2.3% expansions,” according to the Nikkei Asian Review.
“The cyclical and one-off drags on external demand should gradually ease, while fiscal and monetary stimulus should provide a buffer to domestic demand,” said Park Seok-gil, an economist at JPMorgan, in an interview with the news publication.
That said, there are some incoming headwinds that need to be taken care of if the economy is to continue growing in a positive direction. “Notably, rising labor costs amid tighter regulation and an aging demographic structure may hamper business productivity growth,” Park told the Nikkei Asian Review in an interview.
The news comes as South Korea’s president has instituted new fiscal policies to help the country’s workers. While helpful to some, others in the nation have struggled. “President Moon Jae-in’s administration has increased the minimum wage sharply for two consecutive years since taking power in 2017. While this has helped low-income earners, it has left small business owners struggling with the additional labor costs,” according to the news publication.