by Son Seonhee
Published 12 Apr.2022 11:40(KST)
[Asia Economy Sejong=Reporter Son Seon-hee] The ASEAN Macroeconomic Research Office (AMRO), which includes the Association of Southeast Asian Nations (ASEAN) and the three countries of Korea, China, and Japan, warned that South Korea's economic growth could slow this year due to the impact of rising energy prices following Russia's invasion of Ukraine. The inflation rate for this year was also revised upward to 2.9%.
According to the Ministry of Economy and Finance on the 12th, AMRO released the "2022 Regional Economic Outlook" containing these details. The key indicator AMRO focused on in this economic outlook revision was inflation, raising the previously forecasted inflation rate of 2.1% from January by 0.8 percentage points within three months. Recently, major international organizations such as the International Monetary Fund (IMF, 3.0% in January) and the Asian Development Bank (April 3.0%) have also collectively revised upward their inflation forecasts for South Korea.
In addition, AMRO cited risk factors including ▲ the potential emergence of a deadly COVID-19 variant ▲ continued global supply chain bottlenecks ▲ faster-than-expected U.S. monetary tightening ▲ accumulation of financial risks due to decreased household and corporate incomes. It also identified countries such as South Korea, China, and Singapore, which showed strong economic responses last year due to export growth, as nations where growth may somewhat slow this year.
Based on this, the overall growth rate for the ASEAN+3 region this year is expected to reach 4.7%, down 1.2 percentage points from last year's 5.9%. However, South Korea is expected to maintain its previous forecast of 3.0%, as domestic demand is anticipated to be activated based on a high vaccination rate.
AMRO stated, "Considering that the economic recovery is still in its early stages after the COVID-19 pandemic, policy support should be maintained throughout this year," while also recommending, "Balanced policies that promote the supply of labor and capital into new growth sectors are necessary to prepare for the future."
Meanwhile, the Ministry of Economy and Finance reported the recent overall macroeconomic situation to the Presidential Transition Committee on the 6th. Although it did not include a revised government economic growth target, it is reported to have included some institutions' growth forecasts in the '2% range.' It is likely that the growth target will be lowered to the 2% range in the "Second Half Economic Policy Direction" to be announced around June after the new government takes office.
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