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Korea’s Economic Recovery Gains Momentum Despite Global Uncertainties

Bank of Korea: Korea's economy sees improvement driven by IT rebound, with inflation easing, while global conditions pose challenges
South Korea
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Bank of Korea released its economic outlook on Korean economy, revealing a shift towards recovery, overcoming sluggishness observed in the initial half of the year. The upturn is attributed to a resurgence in the IT business cycle, propelling growth into the second half. Forecasts indicate continued improvement into the next year, primarily fueled by robust exports and increased facilities investment.

Consumer price inflation, after a rebound due to supply shocks, is anticipated to exhibit an overall slowing trend. The Global Economic Conditions highlight the modest growth anticipated worldwide, despite challenges such as interest rate impacts. The U.S. is expected to experience a slowdown, while the euro area forecasts a marginal improvement, and China’s growth decelerates gradually due to real estate contractions.

In the domestic scenario, Korea’s economic growth is projected to rise from 1.4% this year to 2.1% next year. The recovery, driven by export and facilities investment, is expected to slightly lag behind the earlier forecast due to weakening domestic demand. Consumer price inflation is foreseen to continue its slowdown, remaining slightly higher than the previous projection.

Noteworthy is the prediction of a widened current account surplus, reaching $30 billion this year and $49 billion next year, propelled by improved exports and a decline in imports. However, challenges persist in the employment sector, with a slowdown in the pace of increase, influenced by weakened domestic demand recovery momentum.

Despite the optimistic outlook, uncertainties loom large, with alternative scenarios exploring the impact of geopolitical conflicts, commodity price shifts, and global manufacturing sector trends on Korea’s economic landscape. In essence, Korea’s economic trajectory is positive, driven by export resilience, but caution is advised amid global economic intricacies and inflation risks.

See the full outlook release below:

Economic Outlook(November 2023)_F

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