Korea Economic Forecast

Korea Economic Outlook

April 26, 2022

GDP growth likely weakened in Q1. The trade balance fell into deficit in the quarter amid rising energy costs, which also fed into higher inflation, hitting private spending and the industrial sector. Consumer confidence was down, while year-on-year industrial output growth and the manufacturing PMI fell in February and March, respectively. An Omicron-induced spike in Covid-19 cases and recent interest rate hikes also contributed to the darker economic landscape. Heading into Q2, economic momentum appears likely to remain stifled, with business confidence down in April. Continued government support for the SME sector—with a second supplementary budget soon to be introduced to Parliament—as well as the end of most Covid-19 restrictions from April will likely be insufficient to soften the blow to activity coming from rising energy costs and the economic slowdowns of Korea’s main trading partners.

Korea Economic Growth

GDP growth will slow to around its pre-pandemic average this year. A tougher base effect, rising energy prices and higher interest rates will all drag on growth. Some support will be given by fiscal spending. Risks include elevated household debt levels, new Covid-19 variants, further energy price swings and a possible housing market slowdown. FocusEconomics panelists see GDP growth at 2.8% in 2022, which is down 0.1 percentage points from the previous month’s forecast. For 2023, GDP is seen expanding 2.6%.

Korea Economy Data

2015 2016 2017 2018 2019
Population (million)51.051.251.451.651.8
GDP per capita (USD)28,72329,27331,55533,39131,731
GDP (USD bn)1,4651,5001,6241,7251,646
Economic Growth (GDP, annual variation in %)2.82.93.22.92.0
Consumption (annual variation in %)2.22.62.83.21.7
Investment (annual variation in %)5.46.69.8-2.2-2.8
Industrial Production (annual variation in %)-0.32.22.71.6-0.1
Retail Sales (annual variation in %)2.43.93.75.61.8
Unemployment Rate3.63.73.73.83.8
Fiscal Balance (% of GDP)0.01.01.31.6-0.6
Public Debt (% of GDP)37.337.636.737.940.7
Money (annual variation in %)8.27.15.16.77.9
Inflation Rate (CPI, annual variation in %, eop)1.11.31.41.30.7
Inflation Rate (CPI, annual variation in %)0.71.01.91.50.4
Inflation (PPI, annual variation in %)-4.0-1.83.51.90.0
Policy Interest Rate (%)1.501.251.501.751.25
Stock Market (annual variation in %)2.43.321.8-17.37.7
Exchange Rate (vs USD, aop)1,1321,1601,1311,1001,166
Exchange Rate (vs USD)1,1731,2081,0711,1161,156
Current Account (% of GDP)7.26.54.64.53.6
Current Account Balance (USD bn)10597.975.277.560.0
Trade Balance (USD billion)90.389.295.269.738.9
Exports (USD billion)527495574605542
Imports (USD billion)436406478535503
Exports (annual variation in %)-8.0-5.915.85.4-10.4
Imports (annual variation in %)-16.9-6.917.811.9-6.0
International Reserves (USD)368371389404409
External Debt (% of GDP)27.025.525.425.628.4

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Value Change Date
Bond Yield1.681.55 %Dec 31
Exchange Rate1,1560.21 %Dec 31

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