[Courtesy of OECD Economic Outlook]
The Organization for Economic Cooperation and Development (OECD) predicted on Wednesday that the South Korean economy would grow by 2.3 percent in 2024. The figure is an increase of 0.2 percentage points from its previous forecast of 2.1 percent, and the country’s inflation rate in the coming year is also expected to be 2.7 percent.
According to the country’s Ministry of Economy and Finance, the OECD projected the South Korean economy to grow by 2.3 percent in 2024 in its economic outlook released on Wednesday, which is higher than the September forecast. The economic growth forecast for the country in 2023 is set at 1.4 percent, a 0.1 percentage point decrease from the previous estimate.
The reason for this upward revision is attributed to the expected improvements in the country’s domestic consumption and exports. On the domestic front, the OECD explained that while the burden of debt repayments and rising prices could act as short-term constraints on consumption and investment, domestic demand is expected to improve in the latter half of 2024. The recovery will also improve as exports rebound, thanks to the recovery in semiconductor demand.
The inflation rate for Korea for 2023 is projected to be 3.6 percent, up 0.2 percentage points from the September forecast of 3.4 percent, with the adjustment influenced by the rise in energy and food prices. But the inflation rate is expected to decline to 2.7 percent in 2024 and 2 percent in 2025, approaching the government target of 2 percent.
Meanwhile, the Bank of Korea’s Monetary Policy Committee maintained the benchmark interest rate at the current 3.5 percent at its Thursday meeting despite concerns persisting about high inflation and household debt not being curbed by freezing the base rate for a seventh consecutive month.
“The economic recovery has fallen short of expectations, and it is difficult to say that prices have stabilized,” Cho Young-moo, a researcher at LG Economic Research Institute, said. “With household debt still increasing and the interest rate gap with the United States widening up to 2 percentage points, it is not easy for Korea to lower rates before the United States.”
By Lee Hee-jo and Yoon Yeon-hae
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