Overseas IBs Raise South Korea Growth Forecasts...Next Year's Projection Also Increased to 3.3%

Barclays and 8 Others Raise Forecasts by 0.2%P in a Month
Woori Financial Research: "If Biden Wins, South Korea's GDP Could Rise by Up to 0.3%P Next Year"

Former Vice President and Democratic presidential candidate Joe Biden spoke at a podium alongside Vice Presidential candidate Senator Kamala Harris on the 5th (local time) in Wilmington, Delaware, where he resides.
[Image source=Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] Major overseas investment banks (IBs) have successively raised their forecasts for South Korea's economic growth rate this year. This reflects expectations that the economy will recover from the shock of the novel coronavirus infection (COVID-19). There is optimism that external trade conditions will improve and domestic demand, including consumption within South Korea, will revive.

According to the International Financial Center as of the end of October, the average real gross domestic product (GDP) growth rate forecast for South Korea this year by nine overseas IBs?Barclays, Bank of America Merrill Lynch (BoA-ML), Citi, Credit Suisse, Goldman Sachs, JP Morgan, HSBC, Nomura, and UBS?is -1.2%.

This is a 0.2 percentage point upward revision from the -1.4% forecast presented the previous month. Among the 10 Asian countries for which these nine IBs provided forecasts, seven countries including South Korea had their growth rates revised upward. Except for India and Indonesia (which were revised downward) and the Philippines (which remained unchanged), the forecasts for seven countries were raised. This reflects the good level of COVID-19 containment in Asian countries, improved external trade conditions, and a recovery trend in exports.

Credit Suisse had forecast South Korea's growth rate at -1.9% at the end of September but revised it upward by 0.7 percentage points to -1.2% at the end of October. Following that, Barclays (-1.5% → -0.9%, 0.6 percentage points), JP Morgan (-1.5% → -1.0%, 0.5 percentage points), Citi (-1.8% → -1.4%, 0.4 percentage points), and Goldman Sachs (-1.6% → -1.3%, 0.3 percentage points) also made significant upward revisions.

Bank of America Merrill Lynch (BoAML) maintained its forecast at -0.8%, HSBC at -1.2%, and UBS at -2.0%.

Japan's Nomura had forecast a growth rate of -0.6% at the end of September but revised it downward by 0.2 percentage points to -0.8% last month.

These IBs also slightly raised South Korea's growth rate forecast for next year from 3.2% to 3.3%.

This forecast is based on the end of October and reflects the expectation that South Korea's economy will be influenced by which candidate wins the U.S. presidential election. As the likelihood of Democratic candidate Joe Biden's victory increases, experts anticipate that the large-scale fiscal stimulus from the Democratic Party will lead to a recovery in the U.S. economy, which will have a positive impact on South Korea as well.

The Hyundai Research Institute recently stated in a report, "If the U.S. economic growth rate increases by 1 percentage point, it acts as a growth driver increasing South Korea's export growth rate by 2.1 percentage points and economic growth rate by 0.4 percentage points." Based on this, it projected that compared to the re-election of U.S. President Donald Trump, the annual average growth driver for South Korea's total exports would be 0.6 to 2.2 percentage points higher, and the upward pressure on economic growth would be 0.1 to 0.4 percentage points higher if Biden is elected.

The Woori Financial Research Institute predicted, "Biden's victory will be an upward factor of 0.1 to 0.3 percentage points for South Korea's growth rate next year."

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