KDI Maintains Growth Forecast at 1.5% for This Year

"Alleviation of Export Slump... Growth Expected to be Similar to Previous Forecast"

The Korea Development Institute (KDI), a government-funded research institute, has maintained its forecast for South Korea's economic growth rate at 1.5% for this year, unchanged from its previous estimate. While major institutions such as the government and the International Monetary Fund (IMF) have downgraded their growth forecasts for South Korea, KDI has kept its original projection. Although the effects of China's reopening are limited, signs of a global economic recovery centered on the United States suggest that the slump in South Korean exports will ease.

On the 10th, KDI projected South Korea's economic growth rate for 2023 at 1.5% in its '2023 Economic Outlook Revision.' This figure is the same as the 1.5% forecast announced in the '2023 First Half Economic Outlook' released in May. Recently, as the government and international organizations have successively lowered their growth forecasts to around 1.4%, KDI has maintained its previous forecast in the 1.5% range. KDI's forecast is higher than the IMF's 1.4%, the Asian Development Bank's (ADB) 1.3%, and the government's 1.4%, and is equal to the Organisation for Economic Co-operation and Development's (OECD) 1.5%. Major institutions have lowered South Korea's economic growth forecasts due to expectations of export sluggishness amid a decline in global trade volume.

Jung Kyu-chul, head of KDI's Economic Outlook Office, said, "The difference between other institutions' main growth forecasts of around 1.4% and KDI's 1.5% is only 0.1%, so the forecasts are almost the same," adding, "Since the May forecast, China's economic recovery has not been as sufficient as expected, but the solid performance of the U.S. economy has offset this to some extent."

He continued, "Private consumption is expected to fall short of expectations, but the easing of export sluggishness centered on manufacturing such as automobiles has led us to maintain the growth forecast as before." In May, KDI had forecast a gradual economic recovery starting in the second half of this year, driven by an easing of domestic demand weakness centered on consumption, the ripple effects of China's economic recovery, and an improvement in semiconductor export sluggishness.

This time, KDI focused on rising expectations for a global economic recovery centered on the United States. Recently, the IMF revised upward its global economic growth forecast for this year to 3.0%, 0.2 percentage points higher than the 2.8% forecast in April, mainly due to the U.S. and the Eurozone. KDI stated, "Inflationary pressures in the Eurozone have eased, weakening expectations for further interest rate hikes and reducing downside risks to the economy." Accordingly, the decline in South Korean exports, centered on automobiles and semiconductors, is narrowing, which is expected to offset the weakness in private consumption. Private consumption is forecast to increase by 2.5%, lower than the previous forecast of 3.0%, reflecting the moderate pace of recovery in overseas travel.

The growth forecast for next year was also maintained at 2.3%, the same as the figure announced in May. The consumer price inflation rate was revised slightly upward to 3.5% from the previous forecast of 3.4%, reflecting higher international oil prices. Reflecting stronger-than-expected manufacturing employment performance due to the automobile industry's favorable conditions, the increase in the number of employed persons was revised upward from 270,000 to 300,000. The unemployment rate was slightly lowered from 2.9% to 2.8%.

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