The IMF's Alarming Warning About the National Pension [Opening the Morning] (2023.12.07.)

The International Monetary Fund (IMF) advisory report on Korea (IMF Country Report No. 23/369. REPUBLIC OF KOREA - 2023 ARTICLE IV CONSULTATION) was made public on the 16th of last month.

It briefly attracted media attention before apparently fading from public discourse.

The aspect that drew media coverage was the projection that Korea's national debt would double relative to gross domestic product (GDP) by 2075, approximately 50 years from now.

The primary driver of the rising national debt is pension expenditure attributable to population aging. Despite the deeply alarming nature of this content, the detailed findings contained in the annex to the report have not received adequate public attention.

The detailed pension-related findings in the annex to the IMF report are even more alarming (Annex X. Pension Reform Options to Cope With Rapid Aging).

Korea's rapid population aging and its pension system alone—just these two factors—are projected to cause the national debt to double relative to GDP within 50 years.

The IMF projects that national debt relative to GDP would still increase even if the National Pension eligibility age were raised by six years (to age 71), and even if the National Pension benefit amount were halved.

This holds true when only one of the two options—raising the eligibility age or halving benefits—is adopted at a time.

It is worth examining in greater detail the IMF's projections of the national debt ratio 50 years hence (in 2075) under each fiscal stabilization alternative analyzed.

Under the baseline projection, the national debt-to-GDP ratio reaches approximately 200% by 2075.

Only if the National Pension contribution rate is raised by an additional 13.8 percentage points above the current 9%—to 22.8%—does the national debt ratio cease to increase.

The analysis demonstrates that whether one chooses to raise the retirement age or lower the income replacement rate individually, and even when all three policy instruments—increasing the contribution rate, raising the retirement age, and lowering the income replacement rate—are employed simultaneously, the national debt will continue to grow if the reforms undertaken are insufficient.

Such measures would merely slow the pace at which the national debt-to-GDP ratio increases.

https://n.news.naver.com/article/469/0000774057?sid=110