The Bank of Korea: "US Economic Growth May Temporarily Slow Due to Delta Variant Impact"

[Asia Economy Reporter Kim Eun-byeol] The Bank of Korea has assessed that the growth momentum of the U.S. economy may temporarily slow down due to factors such as the spread of the COVID-19 Delta variant.

In its report titled 'Overseas Economic Focus - Evaluation of Recent Concerns over the Slowdown in U.S. Economic Growth' released on the 22nd, the Bank of Korea stated, "Although the U.S. economy showed a sharp recovery in the first half of the year, concerns about a slowdown in growth have emerged recently due to the spread of the Delta variant, ongoing production disruptions, and the expected implementation of tapering (reduction of asset purchases)."

According to the Bank of Korea, recent U.S. consumption-related economic indicators such as consumer sentiment and retail sales have deteriorated, and major investment banks (IBs) have lowered their growth forecasts for the U.S. this year. The Bloomberg survey of IBs' U.S. growth forecasts for this year dropped from 6.6% last month to 6.2% this month.

Goldman Sachs explained, "If the spread of COVID-19 intensifies, consumers may voluntarily hesitate to participate in economic activities due to infection concerns, potentially delaying the recovery of service consumption."

However, the Bank of Korea expects that even if the U.S. economic growth temporarily slows, the underlying recovery trend will continue.

The Bank of Korea explained the basis for its outlook, stating, "Due to the vaccine's effectiveness in preventing severe cases and accumulated learning effects, the economic impact of COVID-19 has lessened compared to the past, and the 'supply bottleneck' caused by global supply chain disruptions and labor shortages is expected to gradually improve."

Regarding the monetary policy of the U.S. Federal Reserve (Fed), it said, "There are concerns that if the Fed normalizes monetary policy faster than expected, it could constrain the economic recovery," but added, "Considering the Fed's stance so far, it is expected to communicate sufficiently with the market when normalizing monetary policy such as tapering, and to adjust the timing, pace, and asset composition accordingly."

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