Hyundai Research Institute "Projects South Korea's Economic Growth Rate to Rise by 0.5%p to 2.7% This Year"

The Hyundai Research Institute announced on the 6th that it has revised upward South Korea's economic growth forecast for this year from the previous 2.2% to 2.7%, an increase of 0.5 percentage points.

The institute explained that the upward revision was due to the unexpectedly strong economic growth rate in the first quarter. It also emphasized that the structure of trade and current account surpluses characterized by an "overseas boom-domestic slump" is being reinforced as exports recover steadily while imports fall short of expectations due to sluggish domestic demand.

The institute expects the Korean economy to move away from last year's simultaneous slump in exports and domestic demand and enter an export-led growth phase this year. The export growth rate is projected to rise significantly from -7.5% last year to 9.3% this year, influenced by the revitalization of global trade.

Since the pace of export recovery is faster than the increase in imports, the trade balance is predicted to shift from a deficit of $10.3 billion in 2023 to a surplus of $43.4 billion in 2024. The current account surplus is also expected to increase significantly from $35.5 billion last year to $61 billion this year.

Regarding domestic demand, the institute foresees that the recovery of real purchasing power will be slow due to high inflation and high interest rates, resulting in a modest improvement in household consumption sentiment. The consumer price inflation rate is expected to record 2.7%, as supply-side inflationary pressures in the first half of the year are anticipated to ease in the second half.

The institute stressed that for the Korean economy to enter a normal growth path, short-term bridge strategies such as securing public support for government economic policies and reducing financial market volatility are necessary before a pivot (interest rate cut) occurs.

It also pointed out the need to shift to a flexible monetary policy stance to strengthen domestic demand resilience and to maintain fiscal policy aimed at revitalizing livelihoods. To reinforce the strength of private consumption recovery, it argued that efforts should focus on expanding real purchasing power and alternative consumer markets.

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