[Q&A] Bank of Korea Statistics Director "Expected to Achieve Per Capita GNI of 35,000 USD Last Year"

3.0% Growth Expected This Year
BOK "Difficult to Accurately Estimate Supplementary Budget Effect"

[Asia Economy Reporter Jang Sehee] The Bank of Korea analyzed that last year’s per capita real Gross National Income (GNI) would reach $35,000. Furthermore, it predicted that this year’s growth rate forecast of 3.0% by the Bank of Korea is also achievable.

Hwang Sangpil, Director of the Economic Statistics Bureau at the Bank of Korea, stated at a press briefing immediately after the announcement of the "2021 Q4 and Annual Real Gross Domestic Product (GDP) Preliminary Report" on the 25th, "Considering nominal national income, the decline in the exchange rate, and the slowdown in population growth rate, last year’s GNI is expected to be about $35,000, approximately a 10% increase from 2020 ($31,881)."

The following is a Q&A session with the director.

▲ What was the exact average annual growth rate over the two years, 2020 and 2021?

= Calculating the average annual growth rate over the two years results in 1.5%. Compared to past crises such as the foreign exchange crisis and the global financial crisis, the causes of the crises and the economic scale differ, making direct comparison difficult, but it can be evaluated as showing a considerable recovery trend.

▲ What were the main factors behind the annual growth rate reaching 4%?

= It was due to the shift to increases in private consumption and net exports, along with continued growth in facility investment and government consumption. Private consumption decreased in 2020 due to the COVID-19 pandemic, but consumption agents adapted to the pandemic, and policies such as easing quarantine measures and government supplementary budgets all had an impact. As the global economy continued to recover, South Korea’s exports showed steady growth.

▲ Looking at the growth contribution of 1.1% in Q4 last year, the government contributed 0.7 percentage points, higher than the private sector’s 0.5 percentage points. Does this mean our economy barely achieved the expected 4.0% growth?

= There was an effect from the government supplementary budget execution, and with the influence of "With Corona," growth occurred mainly in services such as food, lodging, and transportation, as well as nondurable goods like groceries. Growth was driven by both the private sector and the government. Government consumption transfers to the private sector, contributing to private economic growth. It can be seen as simultaneous efforts by both government and private sectors.

▲ How much did the government’s supplementary budget of about 50 trillion won contribute to raising GDP?

= It is believed to have made a significant contribution to private consumption, government consumption, and government investment. Since the supplementary budget and the main budget are mixed, it is difficult to calculate the exact contribution.

▲ What was the background for the increase in service consumption such as lodging, food, and transportation in Q4 last year?

= About 50 trillion won in supplementary budget was released last year. From September, the amount released was 34.9 trillion won. Most of the increase centered on face-to-face services such as food, lodging, groceries, and nondurable goods. The government supplementary budget effect and the private sector’s pent-up consumption due to phased easing of quarantine measures in October and November had a significant impact. In December, social distancing was strengthened, and credit card usage centered on restaurants slowed, but compared to the past, the decline is expected to be limited.

▲ How do you see the impact of the Omicron variant and others on future economic growth rates?

= Looking at the impact of COVID-19, the first shock was very large. As the third and fourth waves came, people adapted, so the decline became smaller and the recovery speed much faster. Credit card usage data until mid-January shows that while face-to-face services decreased compared to before, online consumption also increased, limiting the decline. Considering this, although it is uncertain how the spread of COVID-19 due to Omicron will develop, negative impacts are expected to decrease due to economic agents’ adaptation.

▲ How will the future global growth slowdown trend affect our economy?

= Global trade is showing a steady growth trend. Risks such as the re-spread of the global pandemic, supply disruptions, and risks in the Chinese economy will act as downside risks, but as the global economy continues steady recovery, South Korea’s exports are expected to show solid growth. Since demand for memory and system semiconductors remains high, a significant impact is not expected.

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