AMRO "South Korea's Inflation Has Peaked... Growth Rate 1.9% Next Year"

[Asia Economy Sejong=Reporter Son Seon-hee] The ASEAN (Association of Southeast Asian Nations) +3 (Korea, China, Japan) Macroeconomic Research Office (AMRO) has forecasted South Korea's economic growth rate for next year at 1.9%.

According to the Ministry of Economy and Finance on the 16th, AMRO stated that "South Korea's economy faces high short-term uncertainty and significant downside risks," and recommended that "monetary and fiscal tightening is necessary but should be adjusted cautiously."

Kevin Chang, head of the AMRO annual consultation team, said, "South Korea's economic growth rate is expected to slow from 2.6% in 2022 to 1.9% in 2023." Compared to AMRO's April forecast of 3.0% growth for this year and 2.6% for next year, this represents a decrease of 0.4 percentage points (p) and 0.7 percentage points, respectively.

This forecast is higher than those of the Organisation for Economic Co-operation and Development (OECD) at 1.8%, the Bank of Korea at 1.7%, the Korea Development Institute (KDI) at 1.8%, and the Asian Development Bank (ADB) at 1.5%. AMRO judged that South Korea's inflation trend has passed its peak.

However, AMRO described the South Korean economic situation as "highly uncertain with significant downside risks," citing short-term risks such as the resumption of raw material price increases, supply chain disruptions, faster-than-expected policy rate hikes by the U.S. Federal Reserve (Fed), household and corporate debt, sharp economic slowdowns in advanced countries, and slower-than-expected economic recovery in China.

Medium-term risks mentioned include increased interest burdens and difficulties faced by vulnerable households and companies, as well as vulnerabilities in some real estate developers with large real estate project financing (PF) risk exposures and small securities firms.

AMRO stated, "Monetary and fiscal tightening are both necessary, but adjustments should be made cautiously to support the economy and curb inflation," adding that "strengthening social safety nets, enhancing fiscal soundness through fiscal rules, and monitoring debt repayment trends among vulnerable groups are needed." Regarding monetary policy, AMRO said, "The current policy stance is appropriate," but also noted that "the Bank of Korea should adjust the pace flexibly and proactively."

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