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BOK chief warns that cutthroat culture in capital jeopardizes growth

Published: 14 Mar. 2025, 17:20

SHIN HA-NEE
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Bank of Korea Gov. Rhee Chang-yong speaks during the Global Engagement & Empowerment Forum on Sustainable Development, or GEEF 2025, held at Yonsei University, western Seoul, on March 14. [NEWS1]

Seoul, the heart of Korea’s economic “miracle,” is bursting with people seeking opportunities — which is why the nation’s birthrate plunged to one of the lowest in the world, the country’s chief central banker said Friday as he warned against looming “rapid demographic collapse.”

“While Korea’s rapid economic development — the ‘Miracle on the Han River’ — transformed the country into an economic powerhouse, it also centralized infrastructure, talent and opportunities in Seoul,” said Bank of Korea (BOK) Gov. Rhee Chang-yong in his keynote speech during the Global Engagement & Empowerment Forum on Sustainable Development (GEEF) 2025 held at Yonsei University, western Seoul.

“Consequently, young people continue migrating to the capital for career prospects, draining vitality from regional economies and pushing many toward demographic extinction,” Rhee said.

Those in Seoul and the surrounding regions, on the other hand, are discouraged from having children due to cutthroat competition as well as anxieties over employment, housing and child care, the governor explained.

A recent BOK study found that Korea’s potential growth rate could plummet from the current 2 percent to near zero by the late 2040s. If the total fertility rate of 0.75 babies per woman persists, the economy would begin to shrink in 2050.

Korea’s total fertility rate rebounded for the first time in nine years from a record low of 0.72 in 2023 to 0.75 last year. The figure, however, still remains one of the world’s lowest.

Newborn babies at a hospital in Incheon on Feb. 26 [NEWS1]

“If this trend continues, Korea faces an irreversible population crisis that threatens economic stability and social cohesion,” the governor warned, stressing that Korea should double its total fertility rate to the 1.4 average of member states of the Organisation for Economic Cooperation and Development for sustainable economic growth.

To that end, Rhee once again proposed the idea of a “regional proportional admissions system” in which universities voluntarily allocate admissions based on each region’s proportion of high school seniors.

The governor has repeatedly weighed in on various structural issues within Korean society — a practice rarely seen from his predecessors. The regional university admission quota, in particular, remains one of the most contentious proposals from the central bank.

The system could, in theory, lower the demand for housing in Seoul’s most prestigious neighborhoods, known for their education infrastructure, and ultimately ease the population concentration in the capital region as parents relocate in hopes of increasing their children's university chances in the allocation system.

“Korea’s critically low fertility rate, extreme population concentration in the Seoul metropolitan area and overheated university competition seem like separate issues but are deeply interconnected,” said Rhee.

While recognizing the strong belief in Korea that admissions based on a standardized test is the fairest, Rhee stressed that other advanced nations such as the United States actively promote regional diversity.

The governor also addressed environmental sustainability as another key challenge that Korea faces today, especially due to the country’s significant economic reliance on carbon-heavy manufacturing industries.

“Climate change is not just a challenge for export industries — it already deeply impacts our daily lives and various domestic sectors,” said Rhee. “Thus, addressing climate change and reducing carbon emissions is not a matter of choice — it is an urgent necessity.”

The BOK has been conducting a climate financial stress test, which simulates how institutions might react in various situations related to the climate crisis. The central bank will announce the findings on Tuesday in a joint conference with the Financial Supervisory Service.

BY SHIN HA-NEE [[email protected]]