Addressing Korea’s Long-Term Fiscal Challenges

Author/Editor:

Murtaza H Syed ; Michael Skaarup ; Tarhan Feyzioglu

Publication Date:

January 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

Korea is on the verge of an unprecedented demographic shift. In coming decades, rapid aging will transform it from one of the youngest populations in the OECD to among the oldest in record time. In turn, this shift will put tremendous pressure on the pension system and health and long-term care expenditures. This paper evaluates the impact of population aging on the long-term fiscal position in Korea, and assesses potential policy responses using the IMF's Global Fiscal Model. The paper finds that the key to maintaining a sound long-run fiscal position is to act early and with a range of policy tools, including pension reform, tax base broadening (and, if necessary, rate hikes), improved tax administration and some expenditure reallocation.

Series:

Working Paper No. 2008/027

Subject:

Expenditure Fiscal policy Health care spending Pension spending Revenue administration

English

Publication Date:

January 1, 2008

ISBN/ISSN:

9781451868890/1018-5941

Stock No:

WPIEA2008027

Pages:

25

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