2024-02-14 09:41:58
“Exports such as semiconductors, driving economic recovery
“China’s economic and construction restructuring, risk factors”
▲ Page 8 The Korea Development Institute (KDI), a national research institute, predicted Korea’s economic growth rate this year to be 2.2%, the same as last November. Compared to the forecast in November last year, domestic demand was predicted to be worse and exports to be slightly better. It is analyzed that the Korean economy this year will be most affected internally by construction restructuring and externally by China’s slowing growth rate.
In its ‘2024 Revised Economic Outlook’ on the 14th, KDI predicted that this year’s real gross domestic product (GDP) will grow by 2.2%. It is the same as the forecast of the Ministry of Strategy and Finance and the Organization for Economic Co-operation and Development (OECD) and slightly lower than the 2.3% of the International Monetary Fund (IMF). KDI explained that while maintaining the existing forecast, we must pay attention to changes in each sector. Exports are expected to show a strong recovery, centered on semiconductors, but domestic demand growth is weak. KDI increased its total export growth rate forecast by 0.9 percentage points from 3.8% to 4.7%. The current account surplus was also revised to $56.2 billion, an increase of $13.6 billion from the previous amount.
On the other hand, it is expected that the domestic slump will deepen. Private consumption was adjusted downward from the previous forecast (1.8%) and was expected to increase by only 1.7%. Both product consumption and service consumption are sluggish, and product consumption, which is particularly affected by interest rates, is expected to decline more. The facility investment growth rate was also forecast to be 2.3%, lowered by 0.1 percentage points. In particular, construction investment is expected to decrease by 1.4% due to the recent decline in the real estate market, which is a larger downward revision than the previous forecast (-1.0%). Gyu-cheol KDI, head of the KDI Economic Outlook Department, said, “High interest rates are expected to remain for the time being, making it difficult to expect improvement in private consumption this year.”
Consumer prices were expected to rise by 2.5%. This is 0.1% lower than before. In particular, it is expected to be lower in the second half (2.3%) than in the first half (2.9%) and to approach the government’s price stability target (2.0%) at the end of the year. When asked about the timing of the base interest rate cut, Director Jeong replied, “If the price trend goes to the expected level, there may be discussions on adjusting the policy stance.”
KDI cited geopolitical risks in the Middle East and the possibility of a sharp decline in the Chinese economy, especially in the real estate sector, as external risk factors. Director Jeong said, “If the Chinese economy develops in a significantly different direction than expected, the growth rate may fall to around 2%.” He also predicted that if the restructuring of insolvent construction companies does not proceed smoothly, the slump in construction investment is likely to worsen.
Sejong Reporter Kwak So-young
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