Korea Economic Forecast

Korea Economic Outlook

November 17, 2020

A preliminary estimate showed the economy contracted at a slower pace in annual terms in the third quarter as international trade ameliorated. Exports recovered significantly from the blow dealt by the pandemic in Q2, falling at a much softer rate. Moreover, fixed investment gained steam, growing at a faster pace than in Q2. Turning to Q4, the recovery is seen losing some steam amid surging Covid-19 cases abroad. That said, available indicators for the early part of the quarter are fairly positive: In October, the PMI reading pointed to the first improvement in manufacturing conditions this year, while consumer sentiment grew less pessimistic. Moreover, business confidence increased in November, pointing to sustained improvement in private sector activity. In other news, Joe Biden’s victory in the U.S. election sparked optimism regarding the future of the external sector, amid hopes that global tariffs will ease.

Korea Economic Growth

The economy is set to contract this year as the pandemic hits both domestic and external demand. Going into 2021, an accommodative monetary policy and an expansionary fiscal stance are set to bolster domestic activity, boding well for the recovery. However, further outbreaks of Covid-19 threatening to delay the rebound in global trade pose cloud the outlook. FocusEconomics panelists see GDP growth at 3.3% in 2021, which is unchanged from the previous month’s forecast. For 2022, GDP is seen expanding 2.9%.

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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