Citi Raises South Korea's 2024 Economic Growth Forecast from 0.6% to 0.9%

Next Year's Growth Forecast Also Raised from 1.5% to 1.6%

In the second quarter of this year, the South Korean economy grew by 0.6%, escaping low growth for the first time in five quarters. As a result, investment banks are also revising their economic growth forecasts upward.

On the 24th, Kim Jinwook, a Citi economist, stated, "Reflecting the stronger-than-expected economic growth rate in the second quarter of this year, we are raising our forecast for South Korea's annual economic growth rate from 0.6% to 0.9%." Kim emphasized that the second quarter growth rate of 0.6% exceeded both the market consensus (0.5%) and Citi's own forecast (0.2%). He explained that net exports (0.3 percentage points), private consumption (0.2 percentage points), government consumption, and inventory changes all showed strong performance. Specifically, in private consumption, the automotive sector and service industries such as entertainment, culture, and dining out performed well, while government consumption increased due to higher insurance expenditures. Regarding exports, he analyzed that growth was driven by increased volumes of semiconductors and petrochemical products.

In contrast, construction investment (-0.2 percentage points) and facility investment (-0.1 percentage points) remained weak. Construction investment continued to decline for the fifth consecutive quarter amid sluggish civil engineering and building activities, while facility investment decreased due to weakness in both semiconductor manufacturing equipment and shipbuilding sectors.

The growth forecast for next year was also raised by 0.1 percentage points, from 1.5% to 1.6%. The expected quarterly growth rates are 0.9% in the third quarter, 0.5% in the fourth quarter, and 0.3% in the first quarter of next year. Kim predicted that South Korea's economic growth will gradually slow down.

Kim also noted that the economic growth rate could rise further through the supplementary budget. He said that the distribution of livelihood recovery consumption coupons under the second supplementary budget will contribute to expanding private consumption, and that the remaining portion of the first supplementary budget (13.8 trillion won) is expected to contribute to government consumption this month. He stated, "With an additional expenditure of 35.6 trillion won this year, the economic growth rate could increase by between 0.27 and 0.54 percentage points over four quarters."

Regarding the cancellation of the trade talks between South Korea and the United States that had been scheduled for the 25th, he said, "The Ministry of Economy and Finance has clearly stated that the Minister of Trade, Industry and Energy and the Trade Negotiation Head will proceed with the talks with the United States as planned," adding, "Despite the unexpected delay, it is still expected to be concluded before the August 1 deadline."

However, he still pointed out that US tariffs could have a negative impact on South Korea's economic growth and inflation, and that the construction investment slump is likely to continue into the second half of this year.

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