SEOUL - The Korea Development Institute (KDI), a leading state-run think tank, has affirmed its economic growth forecast for South Korea in 2024 at 2.2 percent, underpinned by an anticipated increase in exports despite persistent domestic demand challenges.
According to Yonhap News Agency, this growth estimate aligns with previous projections made by the South Korean government and the Organization for Economic Cooperation and Development (OECD). It also closely follows forecasts from the Bank of Korea (BOK) and the International Monetary Fund (IMF), which predict growth rates of 2.1 percent and 2.3 percent, respectively, for the same period. The KDI highlighted that the expected economic uplift would primarily stem from robust export demand, especially in the semiconductor sector, which is anticipated to drive the gradual recovery.
The think tank noted that high interest rates have particularly impacted construction investment and are likely to dampen private consumption. However, it projected an improvement in export conditions, buoyed by a more favorable global economic outlook. Adjustments in the KDI's forecasts include a slight decrease in the growth expectation for private consumption, from 1.8 percent to 1.7 percent, and an upward revision of export growth predictions, from 3.8 percent to 4.7 percent.
Furthermore, the KDI adjusted its inflation forecast for 2024 to 2.5 percent, a reduction of 0.1 percentage points from its earlier prediction, citing subdued domestic demand as a factor likely to alleviate inflationary pressures more swiftly than anticipated. This situation might lead the central bank to consider reducing interest rates in the latter half of the year, following a period of maintaining the key rate at 3.5 percent after a series of hikes.
Despite a decline in consumption, the institute forecasts the addition of 220,000 new jobs in 2024, slightly above its previous estimate of 210,000. This optimism is partly due to expected employment growth among women in their 30s and older citizens.
The report also outlined potential challenges, including geopolitical tensions in the Middle East that could elevate global oil prices and disrupt logistics, alongside concerns over a significant slowdown in China's economy, particularly in the real estate sector. Domestically, while the ongoing restructuring within the construction sector is not expected to escalate into broader financial system risks, the possibility of it causing a credit squeeze in related industries and adversely affecting the real economy cannot be entirely dismissed.
In 2023, South Korea's economy witnessed a 1.4 percent growth, with exports and private spending increasing by 2.8 percent and 1.8 percent, respectively. Facility investment saw a modest rise of 0.5 percent. In response to these economic conditions, Finance Minister Choi Sang-mok has committed to leveraging all available policy measures to enhance the welfare of the populace.
SEOUL - In a late morning turnaround, the Seoul stock market recovered from its initial losses on Wednesday, influenced by unexpectedly high U.S. inflation data that dampened hopes of an imminent interest rate cut by the Federal Reserve.According to Yonhap News Agency, the Korea Composite Stock Price Index (KOSPI) experienced a decline of 34.89 points, or 1.32 percent, to stand at 2,614.75 as of 11:20 a.m. This shift occurred as institutions and foreign investors sold off stocks worth approximately 476 billion won ($356 million), contrasting with individual investors who purchased stocks valued at nearly 465 billion won.
The reaction in Seoul followed a downturn in the U.S. markets, where the Dow Jones Industrial Average fell by 1.4 percent to 38,272.75, and the Nasdaq Composite Index decreased by 1.8 percent to 15,655.60, in response to the latest consumer price index report for January. The inflation data cooled anticipations that the U.S. Federal Reserve might reduce interest rates within the year.
In the Seoul stock exchange, major corporations saw a decline in their share values. Samsung Electronics Co. experienced a 1.7 percent drop, SK hynix Inc. saw a 0.7 percent decrease, LG Energy Solution Ltd. fell by 2.3 percent, and Asiana Airlines Inc. witnessed a significant 7.2 percent reduction in its stock price.
However, there were some positive movements among other key players in the market. Hyundai Motor Co. saw a slight increase of 0.4 percent, Jeju Air Co. also gained 0.4 percent, and Korea Aerospace Industries Co., the nation's only aircraft manufacturer, advanced by 0.8 percent.
The local currency, the won, also felt the impact, depreciating to 1,336.80 against the U.S. dollar, marking a decline of 8.7 won from the close of the previous session.