The Bank of Korea raises this year’s growth rate to 0.9%… Construction and tariffs hinder despite supplementary budget effects (Update)

Bank of Korea Maintains Base Rate at 2.5% in August
Growth Forecast for 2023 Raised to 0.9%, 1.6% for 2024
Improved Consumption Due to Supplementary Budget, Yet Construction Slump and Tariff Impact Persist
Inflation Rate Estimates for 2023 and 2024 Raised by 0.1% to 2.0% and 1.9% Respectively, ‘[Edaily Young-eun Jang] The Bank of Korea has revised its economic growth forecast for South Korea for this year to 0.9%, an increase of 0.1 percentage points from the previous estimate. This matches the forecast released by the government on the 22nd. The growth forecast for next year remains unchanged at 1.6%. The inflation rate forecast for this year has been adjusted to 2.0% and next year’s to 1.9%, both increased by 0.1 percentage points.’,
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Trend of Revised Growth Forecast for This Year. (Source= Bank of Korea)

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, 2023 Growth Forecast at 0.9%…Supplementary Budget, Exports + Construction, Tariffs –,
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, ‘The Bank of Korea raised this year’s growth forecast to 0.9% from the previous 0.8% in its revised economic outlook released on the 28th. This matches the median of the survey results conducted by Edaily, which polled 10 macroeconomic and market experts. ‘,
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, ‘While the Korean economy is expected to benefit from consumption boosts and improved exports due to the U.S. government’s supplementary budget execution and early shipments, the downturn in the construction sector and the impact of tariff policies are seen as negative factors. The complex interplay of domestic and international factors has been considered in this forecast.’,
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, ‘Should South Korea’s economy grow by 0.9% this year as forecasted, it would mark the sixth-lowest growth rate in history, following 2009’s 0.8%. It also falls significantly short of the estimated potential growth rate of 1.8-1.9%. ‘,
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, ‘Despite the low growth outlook, the Monetary Policy Committee decided to maintain the base interest rate at 2.5% during its policy direction meeting, reflecting considerations for financial stability. Factors such as stabilized inflation, the record-breaking rebound in metropolitan apartment prices due to rising housing price expectations, as well as the highly volatile won-dollar exchange rate nearing 1,400 won, contributed to this decision. The committee’s fast-paced monetary easing, which included a 100 basis point cut in the base rate since the monetary policy shift last October, also played a role in this rate decision.’,
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, ‘In its “New Government Economic Growth Strategy” announced on the 22nd, the government forecasted this year’s GDP growth to be 0.9%. This is half of the 1.8% projection made in the “2025 Economic Policy Direction” presented in January, yet 0.1 percentage points higher than recent forecasts from the OECD and IMF.’,
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, ‘The Korea Development Institute (KDI), a national research institute, predicted on the 12th that the country’s growth rate would be 0.8% this year, maintaining its May forecast despite the execution of a supplementary budget and a record current account surplus in June, citing the downturn in the construction sector.’,
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[Edaily Young-hoon Lee]

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, Inflation Forecast Upwardly Adjusted…Impact of Abnormal Weather, Second Supplementary Budget,
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, ‘The Bank of Korea raised its inflation forecast for this year to 2.0%, aligning with the median of Edaily’s survey results. Next year’s inflation forecast has been increased by 0.1 percentage points to 1.9%, up from the May estimate of 1.8%. ‘,
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, ‘There is a possibility of rising food prices, particularly in agricultural, forestry, and livestock products due to adverse weather conditions like heatwaves and heavy rain. However, if international oil prices remain stable, inflation is expected to stay around the target rate of 2% by the end of the year.’,
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, ‘Experts point out, however, risks to consumer prices increasing due to factors such as oil prices, the won-dollar exchange rate, demand pressures from domestic recovery, and rising rental prices due to housing supply shortages.’,
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, ‘At the “Inflation Situation Review Meeting” earlier this month, the BOK Deputy Governor Kim Woong noted that while the implementation of massive telecom fee discounts by certain telecom companies like SKT could temporarily slow overall inflation, uncertainties in external conditions and continued price instability in agricultural and seafood products due to weather conditions remain significant.’,
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, ‘The BOK’s research department is set to present detailed grounds for the growth and inflation forecasts at an economic outlook briefing later this afternoon.’,
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, ‘According to Statistics Korea, the year-on-year increase in the Consumer Price Index since the beginning of the year has been △January 2.2% △February 2.0% △March 2.1% △April 2.1% △May 1.9% △June 2.2% and △July 2.1%. The inflation rates for both the first and second quarters were 2.1%.’,
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