[Weekly Outlook] Will the OECD Revise South Korea's Economic Forecast... Focus on Q1 National Income Too

OECD to Announce Economic Outlook on the 8th... Korea's Growth Rate Forecasted at 3% Last Year
BOJ and Others Lower Growth Rate Estimates... Inflation Rate Also in the 5% Range
Preliminary Q1 National Income Figures Released on the 8th... Attention on Trend Changes

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] The Organisation for Economic Co-operation and Development (OECD) will announce the economic outlook for its member countries on the 8th. Analysts expect that the OECD is highly likely to significantly revise its previous economic forecast for South Korea. Attention is also focused on the first quarter national income to be announced by the Bank of Korea.

According to related government departments on the 5th, the OECD will announce the economic outlook for member countries including South Korea on the 8th. Previously, in December last year, the OECD forecast South Korea's economic growth rate for this year at 3.0%. It also projected the consumer price inflation rate to be 2.4% this year.

However, these forecasts are bound to be revised. The severe global supply chain instability caused by geopolitical conflicts such as the Ukraine crisis, as well as China's large-scale lockdown policies, are acting as negative factors for the South Korean economy. Accordingly, the Bank of Korea recently lowered its domestic economic growth forecast for this year from 3.0% to 2.7%, a 0.3 percentage point decrease. The Korea Institute for Industrial Economics and Trade also lowered its domestic economic growth forecast from 2.9% to 2.6% on the 30th of last month, a 0.3 percentage point drop. It projected the growth rate for the second half of this year at 2.5%.

The inflation situation is similar. According to Statistics Korea, the consumer price index last month was 107.56, an increase of 5.4% compared to the same period last year. The inflation rate reaching the 5% range is the first time in about 13 years and 9 months since August 2008 (5.6%) during the global financial crisis. This indicates that the domestic inflation trend is quite serious.

The high inflation situation is likely to continue for some time. The government expects the inflation rate to peak next month and in July. Lee Seung-heon, Deputy Governor of the Bank of Korea, said at the inflation monitoring meeting on the 3rd, "International oil prices and food prices remain at high levels, and with the recent lifting of social distancing measures, demand-side pressures have increased, so a high consumer price inflation rate in the 5% range will continue in June and July."

The Bank of Korea will announce the preliminary results of the first quarter national income on the 8th. The flash estimate released at the end of April showed that the real gross domestic product (GDP) for the first quarter grew by only 0.7% compared to the previous quarter. Attention is focused on what changes will be reflected in the preliminary national income figures, which include industrial activity trends compiled last month.

The Bank of Korea will also announce the preliminary balance of payments for April on the 10th of this month. The current account surplus continued for 23 consecutive months as of March this year. However, the surplus in the goods account has decreased by more than 2.5 billion dollars over the past year. This is the result of a sharp rise in import prices for petroleum and raw materials due to supply chain instability.

The Korea Development Institute (KDI) will announce the economic trends on the 9th. Given that domestic inflation is severe and the trade deficit has already reached a considerable level, the diagnosis of the domestic economy by this national policy research institute is attracting attention.

In the May issue of 'Economic Trends' released last month, KDI stated, "Recently, our economy has been recovering moderately, but as external conditions have worsened, the growth in investment and exports has slowed, expanding downside risks to the economy." This means that after using the expression 'expansion of downside risks to the economy' in the official document diagnosing the domestic economy in April for the first time in three months, the level of concern has increased just one month later.

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