ADB Raises South Korea's Inflation Forecast for This Year from 1.9% to 3.2%

Average Inflation Rate in 46 Asian Countries Rises from 2.7% to 3.7% by 1%P
South Korea's Economic Growth Forecast Presented at 3.0%

[Asia Economy Sejong=Reporter Kim Hyewon] The Asian Development Bank (ADB) projected South Korea's inflation rate at 3.2% this year, an increase of 1.3 percentage points from the forecast made in December last year. The economic growth forecast for South Korea this year was slightly lowered to 3.0%.

ADB announced this in the 'Asian Development Outlook (ADO) 2022' released on the 6th.

ADB issues annual economic forecasts every April and adjusts or maintains figures four times in total: July (supplement), September (revision), and December (supplement).

This forecast notably features a significant upward revision of inflation rates for member countries, including South Korea.

ADB projected the average inflation rate for 46 Asian member countries (excluding Japan, Australia, and New Zealand) at 3.7% this year, up 1 percentage point from 2.7% in December last year. The forecast for next year is 3.1%.

Among the four East Asian countries, South Korea had the largest upward revision of 1.3 percentage points (from 1.9% to 3.2%). Hong Kong's forecast was adjusted from 2.0% to 2.3%, China's from 2.1% to 2.3%, and Taiwan's from 1.1% to 1.9%. South Korea's inflation forecast for next year was set at 2.0%.

ADB stated, "Although inflation pressures in Asia were lower than in other regions last year, inflation is expected to continue rising in the 3% range going forward. South Korea is expected to see an inflation rate of around 3.2% this year due to temporary factors such as high oil prices and rising food prices, but these factors are expected to ease next year, bringing inflation down to 2.0%."

The economic growth forecast for this year was lowered by an average of 0.1 percentage points. The average economic growth forecast for developing Asian countries was revised down from 5.3% to 5.2%, and South Korea's from 3.1% to 3.0%. The growth forecast for next year was set at 5.3% (developing Asia) and 2.6% (South Korea).

ADB commented, "The Asian region is gradually recovering from COVID-19 and is expected to maintain strong growth this year and next. Despite geopolitical uncertainties, Asia is maintaining solid growth due to expanded economic openness compared to the previous pandemic period, supported by widespread vaccination." It added, "Compared to last year's significant recovery from negative growth (4.0%), South Korea is expected to grow at a sustainable level, driven by a recovery in private consumption supported by improvements in the labor market, easing of cross-border movement restrictions, and increased exports due to economic recovery in major countries such as the US and China."

ADB noted that the direct impact of the Ukraine crisis will be concentrated in Central Asia but could affect the entire Asian region through rising energy and food prices. Other risk factors include financial market instability caused by US monetary tightening and the emergence of COVID-19 variants such as Omicron, which increase uncertainty.

ADB also recommended tax reform, stating, "Sufficient fiscal investment is required to overcome growth challenges in developing Asian countries, and tax revenue mobilization is important to achieve this."

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