[2023 National Assembly Audit] BOK "Korean Economy Shows Gradual Improvement... Semiconductor Recovery to Expand Next Year"

"Inflation Slowdown May Lag When Oil Prices Rise"

The Bank of Korea forecasted that the Korean economy will show a slowing inflation rate and a gradual improvement in the economy going forward. The previously sluggish semiconductor market has recently shown signs of recovery, and it is expected that the recovery trend will gradually expand next year, leading to an improvement in our exports as well.

However, given the increased volatility in international oil prices due to the Israel-Hamas conflict and the prolonged global monetary tightening, which have heightened uncertainties in the outlook, the Bank of Korea stated that it will closely monitor the situation and respond accordingly.

On the 23rd, during the National Assembly’s Planning and Finance Committee’s audit report, the Bank of Korea stated, "Although domestic consumption recovery appears somewhat weak, the easing of export sluggishness is gradually improving the economy, and a moderate improvement trend is expected to continue next year."

According to the report, while the global economy is generally showing a slowing trend, the United States continues to experience higher-than-expected growth supported by a strong labor market, whereas China and the Eurozone are showing sluggish economic conditions.

In the case of the Korean economy, the consumer price inflation rate recently rose to 3.7% due to increases in oil and agricultural product prices, but the core inflation rate remains steady at around 3.3%. The current account balance turned to a surplus since May, and the Bank of Korea expects the surplus trend to continue, supported by the recovery in the IT sector.

In particular, the future trend of international oil prices is highly uncertain due to geopolitical risks stemming from the Middle East.

Recently, international oil prices have become more volatile due to Saudi Arabia and Russia extending production cuts, concerns over demand slowdown caused by prolonged high interest rates, and the Israel-Hamas conflict. Oil prices, which had sharply risen by about 30% in the third quarter, fell significantly in October but have recently seen increased upward risk due to the Middle East situation.

The Bank of Korea stated, "If the Middle East conflict eases early, oil prices are expected to stabilize gradually. However, if the situation spreads and prolongs, disruptions in crude oil supply may intensify, maintaining high levels for a considerable period. Increased upward pressure on international oil prices could slow the easing of domestic and global inflation, so it is necessary to closely monitor the situation going forward."

The semiconductor market, a key export item for Korea, had been significantly sluggish since the second half of last year but has recently shown signs of recovery. Semiconductor exports have been gradually increasing since the second quarter of this year, and semiconductor prices slightly rebounded in September.

The recent improvement in the semiconductor market is mainly attributed to strong demand related to artificial intelligence (AI) and the visible effects of production cuts by major companies such as Samsung Electronics, SK Hynix, and Micron. While traditional IT demand for PCs and smartphones is recovering slowly, investments in AI services like ChatGPT are increasing, rapidly expanding demand for high-performance memory semiconductors.

The Bank of Korea added, "Major semiconductor forecasting institutions expect the global semiconductor market to enter a recovery phase around the fourth quarter of this year and gradually expand the recovery trend next year. Semiconductor inventories, which had been a limiting factor, are expected to be adjusted by the first half of next year due to improved supply and demand conditions."

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