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Korea's Growth Forecast Falls to 1.1%

Source
Korea Economic Daily
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  • The UK research firm Capital Economics has revised South Korea's economic growth forecast for this year to 1.1%.
  • This figure is below the estimates provided by the Bank of Korea and initial projections by global investment banks, with the real estate market slump cited as a major factor.
  • The Bank of Korea and major investment banks are also lowering their growth forecasts, and there are concerns about further downgrades if last year's fourth-quarter growth rate is additionally reflected.
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  • The article was summarized using an artificial intelligence-based language model.
  • Due to the nature of the technology, key content in the text may be excluded or different from the facts.

UK Research Firm Joins in Downgrades

A foreign analysis agency has forecasted that South Korea's economic growth rate will remain at 1.1% this year. This figure is below the Bank of Korea's recent estimate of 1.6~1.7% and even lower than the initial lower bound of 1.3% projected by global investment banks.

According to the International Finance Center on the 24th, the UK research firm Capital Economics reported that "South Korea will only grow by 1.1% this year." This is 0.4 percentage points lower than the 1.5% forecast released by Capital Economics at the end of last year.

Capital Economics cited political crises and a slump in the real estate market as major factors for the downward revision. The firm stated in its report, "The slowdown in consumer spending in the fourth quarter of last year indicates that political crises are beginning to burden economic growth." It further noted, "Real estate transactions are sluggish, and unsold housing inventory remains high," adding that "data on construction employment, permits, and housing starts suggest that the construction market is expected to weaken further."

Recently, domestic and international institutions have been consecutively lowering their growth forecasts for South Korea this year. JP Morgan reduced its forecast from 1.7% to 1.3% earlier this month. Barclays lowered its estimate from 1.8% to 1.7%, and Citi adjusted its forecast from 1.6% to 1.5%. The Bank of Korea also revised its growth forecast to 1.6~1.7%, acknowledging that the 1.9% target set at the end of November last year is difficult to achieve.

The issue is that these revised forecasts do not reflect the 'shock' of last year's fourth-quarter growth rate. The Bank of Korea announced on the 23rd that the South Korean economy only grew by 0.1% in the fourth quarter of last year. If this figure is taken into account, there are concerns that the growth forecasts of various institutions may be further downgraded.

Reporter Kang Jin-kyu josep@hankyung.com

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