AMRO sharply cuts 2023 growth outlook for S. Korean economy

December 16, 2022

SEOUL, Dec. 16 (Yonhap) — An economic surveillance organization in Asia sharply lowered its 2023 growth outlook for the South Korean economy, citing falling exports and weak private spending, Seoul’s finance ministry said Friday.

The ASEAN+3 Macroeconomic Research Office (AMRO) lowered its growth estimate for Asia’s fourth-largest economy next year to 1.9 percent from its earlier estimate of 2.6 percent made in April, according to the ministry.

The Singapore-based international organization made the forecast after having an annual meeting with the ministry from Nov. 28 through Dec. 9, it added.

The outlook is slightly higher than a 1.8 percent gain estimated by the Organization for Economic Cooperation and Development and 1.7 percent expansion by the Bank of Korea.

“The Korean economy is forecast to moderate to 1.9 percent in 2023 after a strong growth of 2.6 percent in 2022,” the agency’s lead economist Kevin Cheng said.

“Elevated external headwinds from weakening global demand and tightening domestic financial conditions call for skillful recalibration of policy mix to support the economy and contain inflation,” the expert added.

The agency noted that headline inflation has peaked and is expected to gradually decline to an average of 3 percent next year from this year’s 5 percent range.

The country’s household and corporate debts are “generally sound” over the medium term, but a rising interest burden and a slowdown in demand could affect vulnerable businesses and people, according to the organization.

“The pace of monetary policy tightening should continue to be data-dependent weighing inflation against economic recovery and financial imbalances,” AMRO said.

“The Bank of Korea should adjust its policy pace in a flexible, prudent and forward-looking manner to respond to the economic slowdown and increased financial stability risks,” it added.