Overseas IBs Raise South Korea Growth Forecasts... Will KDI and Bank of Korea Also Increase? (Comprehensive)

9 IB Forecasts: South Korea's Growth Rate Revised from -1.4% to -1.2% This Year

On the 5th, finished cars are waiting at the export shipment dock and storage yard of Hyundai Motor Company's Ulsan Plant. [Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] 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 impact of the novel coronavirus infection (COVID-19). Attention is focused on whether the Korea Development Institute (KDI) and the Bank of Korea, which will release their economic outlooks this month, will revise their existing forecasts.

According to the International Financial Center on the 6th, as of the end of October, nine overseas IBs including Barclays, Bank of America Merrill Lynch (BoAML), Citi, Credit Suisse, Goldman Sachs, JP Morgan, HSBC, Nomura, and UBS forecast an average real gross domestic product (GDP) growth rate of -1.2% for South Korea this year. 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 (downward) and the Philippines (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 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 this, 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. BoAML maintained its previous forecast at -0.8%, HSBC at -1.2%, and UBS at -2.0%. Japanese Nomura had forecast a growth rate of -0.6% at the end of September but lowered it by 0.2 percentage points to -0.8% last month. These IBs also slightly raised South Korea's growth forecast for next year from 3.2% to 3.3%.

KDI plans to announce its economic outlook for the second half of 2020 on the 12th. The Bank of Korea will release its economic outlook on the 26th. The Bank of Korea had previously forecast a growth rate of -1.3% for this year in August. After announcing the preliminary GDP figure for the third quarter (1.9%) last month, Park Yang-su, Director of the Bank of Korea's Economic Statistics Bureau, said, "If the growth rate in the fourth quarter is between 0.0% and 0.4%, the annual growth rate of -1.3% can be achieved," adding, "Since the third quarter growth rate was higher than expected, there is a possibility that the annual growth rate forecast will be revised upward." However, he added, "The recent resurgence of COVID-19 in Europe and the United States remains a risk factor."

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