Next Year, a Crucial Year for South Korea's Economic Future... Full-Scale Economic Recovery Expected After the Second Half

Survey of Experts on Next Year's Economic Outlook to Be Announced on the 21st

The ceremony commemorating Commerce and Industry Day was held on the 31st at the Korea Chamber of Commerce and Industry in Jung-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Domestic economic and management experts foresee that next year, the Year of the Blue Dragon (Gapjin Year), our economy stands at a crossroads where it could either achieve a new leap forward or fall into a mid- to long-term low-growth trap.

According to the results of the "2024 Economic Keywords and Corporate Environment Outlook Expert Survey" released by the Korea Chamber of Commerce and Industry on the 00th, experts chose keywords such as "crossroads (岐路)," "Dragon Gate (龍門點額)," "thin ice," "inflection point," and "Go or Stop" to describe next year's economy, diagnosing that an important moment that will determine the mid- to long-term future of our economy is approaching.

Other experts were divided between optimistic views expecting economic recovery, such as "Gojingamrae (苦盡甘來·sweetness after hardship)," "Unpawollae (雲破月來·clouds parting and moonlight shining through)," and "Sajungguhwal (死中求活·a ray of light in the mire)," and pessimistic views expressing uncertainty about recovery, such as "Squeeze Chimney (too narrow a space to rise)," "Lost in Fog (losing the way in the fog)," and "Jenga Game (a tower that easily collapses with the slightest carelessness)."

Professor Song Eui-young of Sogang University said, "With hopes that the prolonged economic recession caused by COVID-19 and high interest rates will turn into a full-fledged recovery next year, I chose the keyword 'land after rain,' but the domestic and international conditions surrounding our economy remain very difficult and heavily clouded," adding, "If rain falls again before the ground hardens, it quickly turns into a muddy swamp, so our companies need to be more sensitive to changes in the economic environment and respond cautiously."

U-shaped Slow Recovery Expected... Full Economic Recovery to Begin After Second Half of Next Year

When asked about the economic trend outlook for next year, most experts agreed that a rapid recovery is unlikely. 48.9% of experts responded that the economy will show a "U-shaped slow recovery (low then high)," while 26.7% forecasted an "L-shaped stagnation (low then low)." Other forecasts included "downward trend (high then low)" at 16.7%, "upward trend (high then high)" at 3.3%, and "V-shaped rapid recovery (low then high)" at 2.2%.

Source=KCCI

Regarding the timing of Korea's full economic recovery, many respondents pointed to the "second half of 2024" (31.1%) or the "first half of 2025" (26.7%). Some expected recovery "after the second half of 2025" (21.1%) or said it would be "difficult to expect for several years" (13.3%). Only 7.8% of experts expected recovery "before the first half of next year."

The domestic economic growth rate forecasted by experts for next year was around 2.1%, similar to major institutions' projections. In contrast, the global economy is expected to grow by 2.7%, indicating that Korea's growth rate will fall short of the global average.

Regarding domestic consumption, 57.8% of respondents expected it to "slow down compared to this year," while 23.3% expected it to remain "similar to this year," and 18.9% anticipated "improvement over this year." For investment, more respondents expected a "slowdown compared to this year" (37.8%) than those expecting "improvement" (27.8%), with 34.4% expecting it to remain "similar." Exports were expected to "improve compared to this year" by 51.1% of respondents, while 25.6% expected a "slowdown," and 23.3% expected it to remain "similar."

Professor Shin Kwan-ho of Korea University said, "Exports next year are expected to improve compared to this year, mainly due to semiconductor industry recovery," adding, "However, uncertainty remains regarding China's economic recovery, and conditions such as global inflation and high interest rates are unclear, so it is necessary to minimize risks arising from these factors."

Persistent Domestic and External Risks Including Prolonged US Monetary Tightening and Household Debt Deepening

Concerns about domestic and external risks that Korea's economy should watch out for in 2024 were also raised. Among external risks, "prolonged US monetary tightening" (37.8%) was the most frequently cited concern, followed by "intensified global export competition" (36.7%) and "China's low growth" (33.3%), reflecting worries about export trade decline. Other concerns included "high oil and raw material prices" (24.4%), "continued high exchange rate" (23.3%), and "deepening global economic bloc formation" (22.2%).

Regarding the most cited external risk, "prolonged US monetary tightening," the majority of respondents (43.3%) expected "US interest rate cuts to begin in the second half of next year." 32.2% expected cuts to start in the first half, while 24.4% forecasted no cuts during next year.

Most experts agreed that Korea's base interest rate should be "determined considering US interest rate movements" (94.4%), with only 5.6% saying it should be decided independently. Regarding Korea's interest rate cut strategy, 83.5% responded that cuts should be gradual and based on US rate cuts and economic conditions, while only 10.6% supported preemptive cuts ahead of the US.

Among domestic risks, "deepening household debt" (53.3%) was the most frequently cited, followed by "real estate-related risks" (33.3%), "rising production and consumer prices" (32.2%), and "domestic economic recession" (28.9%), highlighting livelihood-related issues. Some experts (20.0%) also pointed to "political issue overheating" ahead of the 22nd National Assembly elections scheduled for April next year.

Lee Boo-hyung, Director at Hyundai Research Institute, said, "Although positive changes such as rising expectations for domestic export recovery, the possibility of a global pivot (monetary policy shift), and fiscal policy flexibility are emerging, the uncertain recovery of China's economy, geopolitical uncertainties, and the high possibility of sudden risks mean that the likelihood of our economy fully returning to a recovery trajectory next year remains low," adding, "It is necessary to enhance transparency and predictability in policy decision-making so that domestic economic actors can respond flexibly and stably to various sudden risks, and to operate effective policies that can increase the sense of recovery during the economic rebound."

Source: Korea Chamber of Commerce and Industry

What Do Economic Experts Want from the 22nd General Election Pledges? ① Support for Future Strategic Industries, ② Deregulation to Promote Investment

Regarding economic and corporate-related pledges for the 22nd general election next spring, many respondents held negative views, with 38.9% expecting "low effectiveness or low importance," and 24.4% expecting "many pledges that increase corporate burdens through regulations and taxes or favor labor interests." <36.7% expected "many effective pledges to improve the corporate environment and revitalize future industries.">

Professor Cho Sung-hoon of Yonsei University said, "The economy is entering a new normal era with global market restructuring, digital transformation, and carbon neutrality, but socioeconomic environments such as systems, legislation, policies, and awareness remain stuck in the old framework, hindering a leap to the new economy," adding, "I hope the political sphere will put more effort into resolving this mismatch and work harder for the sustainable growth of our economy."

The newly formed National Assembly faces tasks such as "support for strategic industries and R&D" (33.9%), "deregulation to promote investment" (21.7%), "strengthening job creation support systems" (9.4%), "enhancing labor market flexibility" (7.2%), "tax support such as inheritance tax relief" (5.6%), "financial advancement and strengthening corporate financing" (3.3%), "support for export difficulties and trade" (9.4%), "support for SME growth and startups" (8.9%), and "strengthening regional balanced development support" (0.6%).

Experts urged the government entering its third year in power to focus on "household and corporate debt management" (32.2%), "strengthening support for future strategic industries" (16.7%), "expanding exports and strengthening economic security" (14.4%), "price management" (12.2%), "addressing low birthrate and expanding growth potential" (11.1%), "legislation and deregulation to reduce corporate burdens" (6.7%), "pursuing three major reform tasks" (3.3%), and "carbon neutrality and energy security" (1.1%).

Kang Seok-gu, Head of the Korea Chamber of Commerce and Industry's Research Division, said, "2024 will be a crucial year to decide whether our economy walks the path of sustainable growth or long-term stagnation, but given the current situation, the path to sustainable growth looks narrow while the path to long-term stagnation appears wider," adding, "I hope our government and the newly formed National Assembly will join forces to support our companies in boldly walking the narrow path by turning crisis into opportunity through entrepreneurial spirit."

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