Hankyung Association "Next Year's Economic Growth Rate 2%... This Year 1.3%"

"2% Growth Next Year Due to Base Effect and Export Recovery"
"This Year’s Recession Caused by 3 Highs (High Inflation, High Exchange Rate, High Interest Rate)"

Next year, South Korea's domestic economic growth rate is expected to reach 2%, close to the level before the outbreak of COVID-19. This year's growth rate is projected at 1.3%. Due to the low growth rate this year, a base effect is expected next year, along with a recovery in exports.

The Korea Economic Association (KEA) made this forecast on the 16th through its report titled "Economic Trends and Outlook: 2023-2024."

KEA stated that the economic growth rate next year will reach 2%. This increase to 2% is expected due to the base effect of this year's low growth rate of 1.3% and improved export performance resulting from a gradual global economic recovery. However, domestic demand recovery is expected to occur only after the second half of next year. The end of monetary tightening is anticipated to actually take place in the second half.

Delays in corporate restructuring, economic risks stemming from China's real estate sector, and a domestic private debt crisis are expected to impact next year's growth. In particular, if concerns about private debt defaults materialize and cause negative ripple effects in the financial market, the 2% growth rate may not be achieved. Due to the prolonged effects of monetary tightening weakening economic conditions and reduced policy support capacity, a swift economic recovery is expected to be difficult.

KEA forecasted that private consumption, which accounts for a large portion of the domestic demand sector, will grow by 2%. Factors such as gradual price stabilization leading to increased real income and improved consumption conditions are expected to influence the growth rate. However, the recovery is analyzed to fall short of expectations due to prolonged income base deterioration and the heavy burden of principal and interest repayments on the sharply increased household debt.

Facility investment is also expected to record a 3.0% growth rate as the global information technology (IT) sector recovers. Construction investment is not expected to immediately reverse its sluggish trend due to decreases in construction orders and permits this year.

The consumer price inflation rate is expected to be 2.5%, driven by stabilization of raw material prices and easing of the strong dollar phenomenon. The current account surplus is projected to reach $43 billion (approximately 54 trillion won).

On the 1st, Busan Port Sinsundae Pier was bustling with activity.
[Photo by Yonhap News]

KEA also forecasted that this year's economic growth rate will be 1.3%, the same projection presented in the third quarter "Economic Trends and Outlook" report released in August.

Although the Korean economy experienced severe recession in the first half of the year, KEA expects a slight improvement in the external sector in the second half. However, in the domestic sector, monetary tightening policies continued, leading to persistent sluggishness in consumption and investment, which further expanded financial market instability. KEA stated, "This year's economic growth rate will record 1.3%, effectively the lowest since the 1998 International Monetary Fund (IMF) foreign exchange crisis."

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