Government Closely Monitoring Middle East Risks Amid Economic Rebound Concerns

[Asia Economy Reporter Kim Min-young] The government, expecting an economic rebound supported by the easing of US-China trade tensions and a recovery in the semiconductor industry, is closely monitoring variables arising from the Middle East. With the sudden variable of conflict between the US and Iran emerging, the government is paying attention to the possibility that external conditions may deteriorate once again.

On the 9th, the World Bank lowered its global economic growth forecast for this year to 2.5%, down 0.2 percentage points from its previous projection. The World Bank's forecast did not reflect the conflict between the US and Iran, so if tensions between the two countries prolong, the growth outlook could decline further.

While signs of easing tensions between the US and China are emerging, concerns are rising that the conflict between the US and Iran could delay the rebound of the Korean economy. Although the conflict between the two countries may not immediately shock the Korean economy, if it shows signs of prolongation, it cannot be ruled out that it will affect global growth rates and inflation indicators, similar to the US-China trade conflict.

If this happens, it could impact the Korean economy, which expects a virtuous cycle of overall export improvement → investment and consumption recovery → economic rebound, supported by this year's semiconductor export recovery. The Ministry of Economy and Finance has projected an annual economic growth rate of 2.4% for this year. However, the government views the Middle East risk as directly impacting the Korean economy only if international oil prices surge to $70?80 due to supply issues caused by disruptions in oil production. A Ministry of Economy and Finance official stated, "Annual price trends are more important than short-term rises in international oil prices, and so far, we see the market as supply-dominant regarding oil."

The government is also closely monitoring the Middle East risk. On the 10th, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki held a 'Meeting of Relevant Ministers on the Middle East Situation' and said, "No direct impact or unusual trends have yet been observed in the real economy sector," but added, "Uncertainty still remains, so we will watch carefully and respond firmly if necessary."

This content was produced with the assistance of AI translation services.