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| Shipping containers are stacked at a port in the nation's southern porty city of Busan, Aug. 1. Yonhap |
GDP growth feared to stay in 1% range for 2nd straight year in 2024
By Lee Min-hyung
Overseas investment banks have painted a gloomy picture of the Korean economy, forecasting GDP growth to continue to remain in the 1-percent range until 2024 amid a slow recovery of exports.
According to data compiled by the Korea Center for International Finance (KCIF), eight global investment banks forecast the Korean economy to grow 1.9 percent next year on average, compared to 1.1 percent this year.
But this is below the projections made by Korea's major economic institutions. Both Bank of Korea (BOK) and Korea Development Institute expect the country's economy will grow 2.3 percent in 2024.
Three out of eight investment banks ― Barclays, Bank of America Merrill Lynch and Goldman Sachs ― predicted Korea will be able to achieve GDP growth of more than 2 percent next year, but more negative forecasts by five others drove down the average figure.
This will be the first time since relevant data started being compiled in 1954 that the Korean economy grew in the 1-percent range for two consecutive years.
The nation's GDP grew 9.1 percent in 2000 and displayed growth each year until 2019. The economy then contracted 0.7 percent in 2020 due to the COVID-19 pandemic before bouncing back to 4.3 percent the following year. The pace slowed to 2.6 percent in 2022.
The economy was widely forecast to bottom out in the first half of 2023 and enter a recovery track in the latter half. However, the gloomy forecast has raised concerns that the real economy will not be able to attain any outstanding rebound even throughout next year.
According to data from the BOK, the Korean economy achieved growth of 0.9 percent for the first six months of this year. In a revised growth forecast released in May, the central bank also slashed Korea's GDP growth outlook to 1.8 percent in the latter half. The 2023 GDP growth forecast by the central bank is 1.4 percent.
Despite the somewhat optimistic outlook by the government, the Korean economy still faces multiple risk factors ― such as export doldrums and weak private consumption.
Data from the Korea Customs Service show exports have dropped for more than 10 months. Korea's exports fell by 16.5 percent in July from a year earlier, hit hard by a prolonged semiconductor market slump and falling petrochemical product prices.
Another concern is the uncertain outlook of private consumption. After the economy contracted 0.3 percent in the fourth quarter of 2022, the figure has been rising on a quarterly basis. Economic growth in the first quarter bounced back to 0.3 percent and extended growth of 0.6 percent in the second quarter.
The export fall has been buffered by private consumption in the first half. But private consumption is also feared to lose steam, according to BOK data. First-quarter private consumption rose 0.6 percent from a quarter earlier, but it ended up growing merely by 0.1 percent the following quarter.
Economists said the future course of exports will determine Korea's GDP growth.
"Fortunately, Korea's GDP still has room for a rebound after hitting a low in the second quarter, as semiconductor exports are showing signs of recovery, even if consumption will not be able to achieve a resilient recovery," Lim Hye-yoon, an economist at Hanwha Investment & Securities, said.
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