Hana Securities "Private Consumption Momentum Weakens in Second Half... Annual Growth Forecast at 2.6%"

[Asia Economy Reporter Hwang Yoon-joo] An analysis has emerged suggesting that the consumption momentum that drove growth in the second quarter is likely to slow down in the second half of the year.

Jeon Gyu-yeon, a researcher at Hana Securities, stated on the 27th, "As expectations for the economy weaken, Korean consumer sentiment is showing a sluggish trend."

Jeon analyzed, "Korean consumer prices are expected to remain in the low 6% range in July following last month, and the increased burden of living costs will gradually have a negative impact on consumption."

The previously announced second-quarter Gross Domestic Product (GDP) grew by 0.7% quarter-on-quarter (2.9% year-on-year), significantly exceeding expectations. Private consumption showed strong performance, supported by government spending, highlighting growth driven by domestic demand.

Jeon pointed out, "Although favorable employment and government supplementary budgets will support the lower bound for now, a gradual slowdown in consumption seems inevitable."

[Image source=Yonhap News]

He also forecasted that the external sector is likely to continue its sluggish trend. Jeon diagnosed, "Korean exports inevitably depend on global trade volumes, but downward pressure on the world economy is increasing, trade volumes are slowing, and new export orders in manufacturing from major countries are decreasing."

He added, "Although the stabilization of raw material prices will gradually reduce the growth rate of Korean imports, import values still exceed exports, limiting the contribution of net exports in the second half. Production and facility investment of domestic manufacturing companies, which are highly export-dependent, are also likely to remain sluggish."

Jeon evaluated, "The downside risks looming over the domestic economy in the second half have not changed. The recovery momentum of private consumption will gradually weaken, and while government spending supports the economic floor, facility investment and exports will continue to show sluggish trends."

He added, "However, reflecting the more robust-than-expected growth rate in the second quarter, the Korean economy is projected to grow by about 2.6% annually in 2022."

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