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Korea’s 2024 Economic Growth Forecast at 2.0%, Below KDI and IMF Projections

Korea Institute for Industrial Economics predicts slower growth due to sluggish private consumption and negative construction investment
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The Korea Institute for Industrial Economics and Trade has forecasted a 2.0% economic growth rate for Korea in the upcoming year, a figure trailing behind the projections of the Korea Development Institute (KDI) and the International Monetary Fund (IMF), both standing at 2.2%. The institute’s ‘2024 Economic and Industrial Outlook’ report, unveiled on the 20th, outlines a somber economic landscape characterized by a subdued growth rate of 1.3% for the current year.

This year’s growth projection falls below earlier estimates released at the close of 2022 (1.9%) and the adjusted forecast from May (1.4%). The Korea Institute for Industrial Economics and Trade attributes this to a delayed export recovery and a slowdown in both private consumption and investment. Notably, the report highlights the unfavorable impact of higher international oil prices and a strengthened won-dollar exchange rate, deviating from May’s projections (annual average of $78.5 → $83.4 and 1279.3 won → 1309.8 won).

Anticipating challenges in the external economic environment, the institute sets next year’s annual average oil price and won-dollar exchange rate at $83 and 1,288.3 won, respectively, projecting a 0.5% and 1.6% decrease compared to this year. Against this backdrop, the real gross domestic product (GDP) growth rate is forecasted at a modest 2.0%.

Particularly concerning is the expected impediment from private consumption, slated to be only 1.9%, a decline from the current year. High-interest rates, escalating household debt, financial and geopolitical uncertainties leading to declining asset values, and inflationary pressures are cited as conditions likely to dampen consumer sentiment. This projection marks a significant decrease from last year’s rate of 4.1%. Additionally, construction investment is anticipated to exhibit negative growth (-0.2%) in the coming year, influenced by a surplus of unsold housing attributed to elevated interest rates.

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