Woori Financial Research Institute Raises This Year's Growth Forecast by 0.3%P to 3.3%

Export and Investment Drive Improvement in Domestic Growth Rate

[Asia Economy Reporter Kwangho Lee] Woori Financial Management Research Institute has revised its economic growth forecast for this year upward by 0.3 percentage points, from the previous 3.0% to 3.3%.

On the 11th, the institute announced in its 'February Economic Brief' report that it reflected the International Monetary Fund (IMF)'s upward revision of the global economic growth forecast on the 26th of last month (2021: 5.2% → 5.5%) and the promotion of the 4th disaster relief fund (estimated around 20 trillion KRW), raising this year's domestic gross domestic product (GDP) growth forecast to 3.3%.

The institute's revised growth forecast is higher than the IMF's 3.1%, the Korea Development Institute (KDI)'s 3.1%, and the Bank of Korea's 3.0%.

According to the institute's economic forecast model (WQPM), the upward revision of the US GDP growth rate (+2.0 percentage points) and the supplementary budget for the 4th disaster relief fund are expected to increase this year's domestic GDP growth rate by 0.56 percentage points and 0.05 percentage points, respectively.

The 4th disaster relief fund reflects the current consideration of a total payment of 20 trillion KRW plus α, including 14 trillion KRW for universal payments and 6 trillion KRW for support to small business sectors affected by the pandemic.

The institute expects exports and investment to drive the improvement in this year's domestic GDP growth rate.

Exports are expected to rebound (2020: -2.5% → 2021: 7.4%), centered on goods exports, as economic activities in major countries, which were contracted due to COVID-19, normalize and global trade increases.

In particular, reflecting the resumption of global consumption and investment due to vaccine distribution, favorable semiconductor market conditions, and rising raw material prices, the forecast for the growth rate of goods and services exports this year has been significantly revised upward from the previous 2.9% to 7.4%.

Regarding facility investment, new investments postponed due to the global economic downturn are resuming, and investments in new growth industries are expanding through the 'Korean New Deal' project. Following last year's 6.8%, a favorable increase is expected this year as well, raising the forecast from 4.1% to 5.3%.

Construction investment is also expected to increase moderately (last year: -0.1% → this year: 1.7%) due to the government's expansion of public housing construction and an increase in the social overhead capital (SOC) budget (+14.2% compared to the previous year).

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