KDI ups 2024 economic growth outlook for S. Korea to 2.6 pct

May 17, 2024

A major South Korean state-run think tank on Thursday revised up its economic growth outlook for the country this year to 2.6 percent on the semiconductor industry upturn and surging exports.

The latest projection by the Korea Development Institute (KDI) marked a 0.4 percentage point increase from its earlier forecast presented in February.

It is on a par with the projection by the Organization for Economic Cooperation and Development. The government has presented a 2.2 percent growth outlook, and the figure from the Bank of Korea came to 2.1 percent.

“The marked growth in exports is expected to lead to an economic recovery on the back of rising global trade and the cycle upturn of the semiconductor industry,” the KDI said in a report.

Exports, a key economic growth engine, have been recovering since late last year after a yearlong downturn. The government expected exports to advance 8.5 percent this year to reach a record high of over US$700 billion.

The country is likely to experience a full-fledged recovery starting 2025, with the expected growth rate for next year to come to 2.1 percent, according to the KDI.

“Domestic demand is forecast to recover gradually as the impact of high interest rates would be receded and conditions for income could improve,” the KDI said.

Private consumption is projected to rise 1.8 percent this year and 1.9 percent in 2025. Facility investment is forecast to gain 2.2 percent in 2024 and 3.1 percent next year.

Given the current circumstances, any additional pump-priming steps are not needed, the think tank said, though the main opposition Democratic Party leader Lee Jae-myung pledged to provide cash handouts of 250,000 won ($184) to the entire population to help improve people’s livelihoods.

Shipping containers are stacked at a port in the southeastern city of Busan, in this file photo taken Feb. 13, 2024. (Yonhap)
Shipping containers are stacked at a port in the southeastern city of Busan, in this file photo taken Feb. 13, 2024. (Yonhap)

Consumer prices, a key gauge of inflation, are forecast to climb 2.6 percent in 2024 before falling further to 2.1 percent in 2025.

The latest projection marked a 0.1 percent increase from its previous forecast as global oil prices have risen recently.

“The government will be able to gradually ease its restrictive monetary stance, given that inflation is forecast to stabilize to its target rate of 2 percent,” the KDI said.

The central bank has kept its policy rate at 3.5 percent since January 2023, maintaining slightly tight monetary settings.