ADB, South Korea's Inflation Rate Revised Up to 2.3% This Year and 1.9% Next Year, Each Increased by 0.3 Percentage Points

2021 Asia Economic Supplementary Outlook

[Sejong=Asia Economy Reporter Son Seonhee] The Asian Development Bank (ADB) projected South Korea's inflation rate at 2.3% this year on the 14th. This is 0.3 percentage points higher than the forecast (2.0%) released last September.

Next year's inflation rate is also expected to rise by 0.3 percentage points from the previous forecast (1.6%) to 1.9%. This means that the high inflation trend will continue next year following this year.

According to the Ministry of Economy and Finance, ADB announced the '2021 Asia Economic Supplementary Outlook' containing these details on the same day. Regarding the upward revision of South Korea's inflation rate, ADB explained that external factors include the rise in international oil prices, and internal factors include the recovery of everyday economy such as consumption due to the easing of social distancing in the fourth quarter.

South Korea's economic growth forecast remains unchanged at 4.0% for this year and 3.1% for next year. ADB pointed out, "COVID-19 related risks such as new variants like Omicron, low vaccine supply in some regions, and reduced vaccine effectiveness can still act as major risk factors to regional economic growth." Other factors cited as causes of economic slowdown include China's sharper-than-expected economic deceleration, prolonged global supply chain disruptions, and increased financial market volatility due to the normalization of U.S. monetary policy.

The overall economic growth rate for 46 Asian countries was slightly lowered from the previous forecast of 7.1% to 7.0%, and next year's growth rate was also reduced by 0.1 percentage points from 5.4% to 5.3%. ADB stated, "Global risks such as the increase in worldwide COVID-19 cases due to the spread of the Delta variant and global supply chain disruptions are emerging as major risks. Asian developing countries are expected to experience only a slight decline (0.1 percentage points) in growth compared to the previous forecast due to relatively less impact from supply chain shocks, robust export demand, and economic activity recovery from the decrease in confirmed cases."

Regarding the inflation rate for the 46 Asian countries, this year's forecast was lowered by 0.1 percentage points from 2.2% to 2.1%, while next year's forecast remains at 2.7%. ADB assessed, "Although rising raw material prices have driven global inflation this year, supply chain disruptions have not translated into upward pressure on inflation rates in Asian countries, resulting in relatively low inflation forecasts for the 46 member countries in Asia."

As for international oil prices, after peaking in October, they are expected to gradually decline next year as oil supply surpasses demand.

Furthermore, ADB forecasted that as economies recover from the COVID-19 crisis, medium-term risks related to abnormal weather and climate change could emerge as major risks.

This outlook covers 46 member countries excluding Japan, Australia, and New Zealand among the 49 countries in the Asian region. ADB releases four economic outlooks annually: the annual outlook in April, supplementary outlook in July, revised outlook in September, and supplementary outlook in December.

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