Financial Research Institute, "Next Year's Economic Growth Rate 2.9%"

[Asia Economy Reporter Minyoung Kim] It is forecasted that South Korea's economic growth rate will record a negative figure this year but will sharply rebound to 2.9% next year.

At the recent '2020 Financial Trends and 2021 Outlook' forum hosted by the Korea Institute of Finance, Park Sung-wook, head of the Macroeconomic Research Office at the Korea Institute of Finance, stated that the Korean economy is expected to contract by 1.2% this year and then grow by 2.9% next year.

Park explained that due to the impact of the novel coronavirus disease (COVID-19), both domestic demand and exports have been sluggish, leading to a decline in the growth rate this year, followed by a gradual recovery next year.

He said, "If progress is made in vaccine development and distribution, and accommodative monetary and fiscal policies help recover domestic and international demand, a rebound centered on exports and investment is possible."

However, the 2.9% growth rate forecast for next year assumes that the COVID-19 pandemic is controlled within a limited scope, and that vaccines will be approved early next year and distributed to major countries in the second half of the year.

He added, "Assuming the economy improves from the first half of next year immediately after vaccine approval, the economic growth rate could rise to 3.5%."

Among the GDP components, private consumption, exports, and imports are expected to improve significantly. Private consumption is projected to rise from -4.5% this year to 2.7% next year, total exports from -3.9% to 5.8%, and total imports from -4.4% to 4.1%. Facility investment is expected to change from 6.1% to 4.0%, and construction investment from -1.0% to 1.3%.

Park stated, "Private consumption will gradually recover as economic agents adapt to the COVID-19 situation and cautiously resume economic activities, with government policies also having a positive effect," but added, "considering the persistent concerns about COVID-19 infection, it is expected to take considerable time to return to pre-crisis levels."

He continued, "Although the rebound in service exports and imports will be insufficient, the recovery in global economic conditions and the resumption of production at overseas factories will increase goods exports, and the increase in domestic facility investment will drive the growth of goods imports, leading the recovery trend."

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