BOK: 1% Rise in Aging Rate Reduces Per Capita GRDP in South Jeolla, Gwangju by 0.58%

The Bank of Korea’s Gwangju/Jeonnam Branch released a report titled "The Impact of Population Aging on the Regional Economy of South Jeolla and Gwangju" on the 19th. According to the report, a 1% increase in the proportion of the elderly population is estimated to decrease the region’s per capita Gross Regional Domestic Product (GRDP, total annual production of the region) by approximately 0.58%.

An analysis of data from 2000 to 2024 using statistical models by Ahn Ji-yeon, chief of the Economic Research Team, revealed that the impact of aging is most severe in agriculture, forestry, and fisheries (-0.99%). The analysis shows that the service sector as a whole was affected by -0.12%, with wholesale and retail trade (-0.51%) showing a significant decline. Conversely, capital-intensive industries such as manufacturing and electricity/gas showed no statistically significant impact, interpreted as being due to the high potential for substituting labor with capital. The public administration sector (0.41%) was analyzed to increase due to expanded demand for public services arising from an aging population.

Applying these industry-specific impacts to future population projections, it is estimated that population aging will act as a factor lowering the annual per capita GRDP growth rate by an average of 1.4 percentage points in South Jeolla and 1.8 percentage points in Gwangju during 2025~2050. The impact of aging is concentrated in the near future, such as 2025~2030. On a cumulative basis compared to 2024, it is estimated to decline by 11.8% in South Jeolla and 15.7% in Gwangju by 2030, and by 30.5% in South Jeolla and 37.8% in Gwangju by 2050. The decline in agriculture, forestry, and fisheries (average annual decrease of 2.3 percentage points in South Jeolla and 3.0 percentage points in Gwangju) was the largest, while the contraction in wholesale/retail and expansion in public administration are projected to continue throughout the forecast period.

South Jeolla, where aging has already progressed, is expected to see a relatively slow increase in the elderly population going forward. In contrast, Gwangju is entering a phase where aging will proceed rapidly.

Considering the possibility of reverse causality between aging and regional economic growth, the report also employed Two-Stage Least Squares (2SLS) analysis using instrumental variables. In this analysis, the statistical impact of aging on the overall industry was not significant, and a significant impact was confirmed only in agriculture, forestry, and fisheries. The previously cited figure of -0.58% is based on the fixed-effects model. The negative impact on investment (gross capital formation) was found to lack statistical significance.

The report proposed response directions such as strengthening the foundation for inflow of young people and utilization of foreign labor, expanding labor market participation of potential manpower including the elderly and women, and supplementing the decrease in labor input through automation and investment expansion. For agriculture, forestry, and fisheries, it suggested supporting the influx of young farmers and stabilizing the foreign seasonal worker system, while for service industries like wholesale and retail, it proposed expanding the use of the employment permit system.