Major Domestic and International IBs Forecast South Korea's Economic Growth Rate at 2.2~5.0%

[Asia Economy Reporter Kim Eun-byeol] Major overseas institutions have collectively raised their growth forecasts for the South Korean economy this year. This comes after South Korea's fourth-quarter GDP growth last year exceeded expectations, leading to analyses that this will positively impact growth rates this year as well.

The institutions expect exports to continue outperforming expectations this year, following the strong performance in the fourth quarter of last year, thereby boosting the South Korean economy. However, views on domestic demand vary. This is due to differing predictions on how quickly vaccine distribution will proceed and how rapidly employment recovery will occur as COVID-19 subsides domestically.

According to the International Financial Center on the 31st, among six recently published reports from investment banks (IBs) and one research institution, three raised South Korea's GDP growth forecast for this year by 0.1 to 0.3 percentage points. This reflects the Bank of Korea's announcement of the 2020 fourth-quarter GDP results. The GDP in the fourth quarter of last year rose 1.1% quarter-on-quarter, far surpassing market expectations.

Earlier, at the end of December last year, nine overseas IBs including Barclays, Bank of America Merrill Lynch (BoA-ML), Citi, Credit Suisse, Goldman Sachs, JP Morgan, HSBC, Nomura, and UBS projected South Korea's real GDP growth rate for 2021 at an average of 3.4%, which was 0.1 percentage points higher than the forecast a month prior.

Growth forecasts for South Korea's economy this year from major institutions including the Bank of Korea varied widely, ranging from 2.2% to 5.0%. Global economic analysis firm Capital Economics predicted a high growth rate of up to 5.0%, based on the view that the economic impact of the third wave of COVID-19 would be less severe. Capital Economics stated, "Looking at South Korea's latest data, it is clear the economy is holding up well," and added, "The economic impact of the third wave is expected to be relatively minor, and South Korea's economy will continue to recover over the coming quarters."

On the other hand, ING forecast a relatively low growth rate of 2.6%, citing South Korea's slower vaccine rollout compared to Western countries. They expect South Korea's quarterly economic growth rate to fall short of 1.0% quarter-on-quarter.

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