National Assembly Budget Office "This Year’s Korean Economy Expected to Show 'Positive Growth'"

[Asia Economy Reporter Dongwoo Lee] Despite the impact of the novel coronavirus infection (COVID-19), the National Assembly Budget Office (NABO) forecasted that the Korean economy will barely achieve 'positive growth' this year.

In the '21st National Assembly and Korean Economy Outlook' published on the 26th, NABO projected this year's real Gross Domestic Product (GDP) growth rate at 0.1%. This is similar to the government's forecast (0.1%) and the Korea Development Institute's (0.2%), but higher than those of the International Monetary Fund (-2.1%), the Organisation for Economic Co-operation and Development (-1.2%), and the Bank of Korea (-0.2%).

NABO predicted that this year's growth rate will sharply decline in the first half due to the COVID-19 shock, followed by a gradual recovery in the second half. The average annual real GDP growth rate from 2020 to 2024 is expected to be 2.0%, which is 0.8 percentage points lower than the 2.8% recorded from 2015 to 2019.

The potential growth rate for the next five years is expected to be around 2.3%, which is 0.5 percentage points lower than that of 2015 to 2019.

The potential growth rate refers to the maximum growth rate achievable by efficiently utilizing labor and production facilities without overheating the economy, serving as an indicator of the economy's fundamental strength. NABO explained that the reason for the potential growth rate forecast over the next five years is "because the potential growth contributions of capital and labor are expected to decline."

Regarding capital contribution, it was analyzed that it will decrease by 0.4 percentage points compared to the previous five years due to a decline in construction investment and a slowdown in the increase of facility investment. Labor contribution is also expected to slightly weaken compared to the same period due to a slowdown in the growth of the working-age population, a decrease in the increase of employed persons, and reduced working hours.

NABO stated, "Policy attention to households is necessary until our economy recovers from the COVID-19 shock, and preparations must be made for the unfavorable global economic conditions for the Korean economy."

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