South Korea May Catch Japan's Economic Cold

With low growth at home, the chaebol are investing abroad
Seoul Photograph by SeongJoon Cho/Bloomberg

South Korea is becoming more like Japan, and not in a good way. After years of strong economic growth driven by exports of high-end electronics and cars, the country is edging closer to the deflationary, low-growth trap that Japan has been mired in for decades. Korean consumers, weighed down by household debt and a stagnant property market, are saving rather than spending. Companies are hoarding cash as they face uncertain demand at home and more competition from China. Korea’s population is also aging faster than that of any other country in the Organisation for Economic Co-Operation and Development, with people 65 and older set to account for at least 14 percent of the population by 2017. “The way Korea used to grow can’t continue unless Koreans spend more and companies invest,” says Kim Yong Ok, head of economic policy at the Federation of Korean Industries.

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