Adjusted to 3.5% from 4.6% in November last year
Beauty 3.3%, day 2%, medium 5.1% 로 하향
“Won/dollar exchange rate will show high volatility”
Provided by KIEP” style=”padding:0px;margin:0px”>
▲ Annual economic growth forecast by the Korea Institute for International Economic Policy (KIEP)
Provided by KIEP
The Korea Institute for International Economic Policy (KIEP) forecasted the global economic growth rate this year to 3.5%, down 1.1 percentage points from the previous 4.6% due to Russia’s invasion of Ukraine and high inflation.
In the World Economic Outlook for 2022 (updated) on the 17th, KIEP said, “The Russia-Ukraine war will slow the global economic recovery after the COVID-19 outbreak. 19 There is a possibility that re-proliferation may act as a negative factor for growth.”
In response to KIEP’s lowering of this year’s economic growth rate from 4.6% in November last year to 3.5% this time, Ahn Seong-bae, head of the Office of International Macrofinance, said, “The main factors that have changed since November of last year are the spread of Omicron mutation and the outbreak of the Russia-Ukraine war.” “These circumstances appear to have had a differential effect by region,” he explained.
Earlier, the International Monetary Fund (IMF) downgraded the global economic growth rate this year to 3.6% from the previous 4.4%, and the Organization for Economic Cooperation and Development (OECD) had predicted that it could fall by 1 percentage point from the previous 4.5%.
KIEP cited monetary policy, geopolitical clashes, and quarantine policies as risk factors for the global economy in the second half of this year. Monetary authorities face a trade-off between responding to high inflation and policies for economic recovery, which has made the path of monetary policy in major countries extremely uncertain. The Russia-Ukraine war is highly likely to be prolonged due to the large disagreement between Russia, Ukraine, and the Western governments on how to end the war. In addition, major countries are easing their COVID-19 quarantine policies, but KIEP explains that if the spread of COVID-19 intensifies again, there is room to limit the recovery of the global economy.
By major country, the US economic growth rate for this year was revised down from 3.8% to 3.3% due to slowing growth due to high inflation and monetary tightening by the Federal Reserve.
Growth rates in the euro area and the UK were lowered to 2.8% and 3.7% from 4.6% and 5.3% previously. According to KIEP, the rise in energy prices and disruptions in the supply chain are at work in the euro area and the UK, which are directly affected by the Russia-Ukraine war.
Japan’s growth rate was lowered to 2.0% from the previous 3.3% as personal consumption did not recover to pre-COVID-19 levels. China’s growth rate also fell from 5.5% to 5.1%, which was affected by the implementation of lockdown measures due to the re-spread of COVID-19.
India’s growth rate was revised down from 7.9% to 7.4% due to worsening external conditions, and from 1.5% to 0.5% for Brazil due to inflationary pressures and monetary tightening. Russia, which invaded Ukraine, is expected to grow negatively to -9.5%, down 12.4 percentage points from the previous 2.9%.
KIEP predicted that the won/dollar exchange rate will show high volatility this year due to heightened external uncertainties. The stalemate in the Russia-Ukraine war, rising oil and commodities prices, the trade deficit, and the accelerated tightening of the US Fed’s currency could act as factors for the won’s weakness. On the other hand, KIEP pointed out that uncertainty is high as there are strong factors such as robust exports, economic recovery following the easing of quarantine measures, and continued inflow of foreign bond funds.
Jung Young-sik, senior research fellow at the Office of International Macrofinance, said, “Unlike the past such as the 1997 foreign exchange crisis and the 2008 financial crisis, the won is limited to the movement of the dollar. “The level of the won’s weakness is comparable to the strength of the dollar,” he said.
Reporter Sejong Park Ki-seok
