S. Korea's aging population may blunt AI boom wealth

South Korea's AI boom has created immense corporate wealth, but a Goldman Sachs report reveals that this may not translate into broad economic well-being. The country's exceptionally low fertility rate of 0.8 births per woman and a rapidly aging population mean the working-age pool is shrinking, leading to a rising dependency ratio. This demographic strain is already evident in weak retail sales, which remain close to 2019 levels despite strong export growth.

Goldman identifies a unique behavioral pattern: older Koreans save more than any other age group, unlike retirees in Japan, Taiwan, or the U.S. This is partly because much of their wealth is locked in real estate, which is hard to liquidate. With net financial assets only 100% of GDP, the lowest in Goldman's sample, many retirees cannot cover consumption needs with savings, so they cut spending instead.

The long-term outlook is challenging. Even with 2% economic growth, consumption could eventually turn negative, as aging drags on spending. Policymakers are trying to boost birth rates with marriage grants and matchmaking events, but such measures won't help for at least two decades. Goldman suggests more immediate solutions, such as helping the elderly tap into housing wealth and ensuring tech profits are better shared. This situation is distinct from Taiwan, another AI winner, where older consumers have larger financial buffers and spend more despite similar aging pressures.