Korea Economic Forecast

Korea Economic Outlook

June 21, 2022

After a Covid-19 wave dampened domestic demand in Q1 and caused GDP growth to slow, our panelists expect growth to weaken further in Q2. The industrial and external sectors—Korea’s main growth engines—have been hit by the war in Ukraine and the Covid-19 outbreak in China due to their effects on external demand, supply chains and Korea’s terms of trade. The manufacturing PMI and export growth in April–May averaged lower than in Q1. An eight-day long trucker’s strike in June caused further disruption; exports were down 12.7% year on year in the first 10 days of the month. That said, the services sector is likely supporting activity given falling unemployment and that most Covid-19 restrictions were removed in April; consumer confidence and retail sales held up well that month despite rising inflation. The USD 49.5 billion supplementary budget passed in May will further support activity.

Korea Economic Growth

Growth will moderate to around its pre-pandemic average this year, due to a tougher base effect, rising energy prices, global supply bottlenecks and higher interest rates. Some support will be provided by relaxed Covid-19 restrictions and fiscal spending. Risks include high household debt levels, further energy price swings and a potential housing market slowdown. FocusEconomics panelists see GDP growth at 2.7% in 2022, which is down 0.1 percentage points from the previous month’s forecast. For 2023, GDP is seen expanding 2.4%.

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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