1.3% in the first half of next year and 2.1% in the second half of the year
During the first half of the year, exports of goods showed negative growth… Consumption ‘bumps’ in the second half
Next year, the consumer price index is forecast to rise by 3.6% annually.
The Bank of Korea lowered its forecast for next year’s economic growth rate from 2.1% to 1.7%. This is lower than the potential growth rate of the domestic economy, which is considered to be in the 2% range. Consumer price inflation is expected to rise at 3.6% per annum.
According to the ‘Economic Prospect’ published by the Bank of Korea on the 24th, the domestic economic growth rate is expected to show 2.6% and 1.7% this year and next year, respectively. It is analyzed that next year will record 1.3% in the first half and 2.1% in the second half, indicating a high-low economic flow. In 2024, the growth rate is expected to record 2.3% per annum.
There were only four ‘crises’ in which the domestic economy recorded a growth rate of 1%. These include the 1980 oil shock, the 1998 foreign exchange crisis, the 2009 global financial crisis, and the 2020 COVID-19 pandemic. This is also the lowest level since the 2000s, with the exception of 2020 (-0.7%), when it grew negative due to Corona 19, and 2009 (0.8%), which suffered from the global financial crisis.
The decline in the growth rate was due to a decline in exports due to the sluggish economy of the major countries. The Bank of Korea predicted that the growth rate of goods exports in the first half of next year would record minus (-) 3.7%, indicating negative growth. In the second half of the year, as the sluggish economy in China and information technology (IT) eased, it was predicted to rebound and record an increase of 4.9%.
As a result, the current account surplus is expected to record $2 billion and $26 billion in the first and second half of next year, respectively. The ratio of the current account surplus to gross domestic product (GDP) is expected to be in the mid-1% range this year and next.
It is analyzed that the growth rate of private consumption, which showed signs of recovery due to the relaxation of social distancing, will gradually slow down due to rising interest rates and a reduction in purchasing power. The rate of increase in private consumption is expected to fall to 1.3% in the second half after showing 4.3% in the first half of next year.
In addition, demand for new investment in the facilities investment sector is expected to shrink due to high external uncertainty. The rate of increase in investment in facilities is expected to continue, recording -2% this year and -3.1% next year. Construction investment is expected to be slow due to a slowdown in the housing market and a reduction in SOC budgets. The Bank of Korea predicted that construction investment would grow by 2.4% in the first half of the year and then show a -2.4% growth trend as the atmosphere changed in the second half.
Consumer price inflation is expected to show 5.1% and 3.6% this year and next year, respectively. The economic slowdown will be a downside factor next year, but the accumulated cost burden will act as an upward pressure. The result of the economic slowdown is likely to have an impact on the job market as well. The Bank of Korea expected the number of employed workers to reach 820,000 this year, but predicted it would only increase by 90,000 next year.
Chae Seon-hee, Hankyung.com reporter [email protected]