Yonhap News Agency, Seoul, November 24. The Bank of Korea (the central bank) released the "Economic Outlook Update Report" on the 24th, lowering the real gross domestic product (GDP) growth forecast in 2023 from 2.1% to 1.7% from the original 2.1%. The index (CPI) rise is expected to be lowered from the original 3.7% to 3.6%.
The central bank's GDP growth forecast for next year is lower than the potential growth rate of the Korean economy (over 2%), and is lower than the Asian Development Bank (2.3%), the International Monetary Fund (2%), the credit rating agency Fitch (1.9%), the economic expectations made by institutions such as the United Nations Cooperation Organization (1.8%). After 2000, only 2020 (-0.7%) and 2009 (0.8%) were the only years in which South Korea’s GDP growth rate was below 2%.
The reason why the central bank lowered its economic growth forecast for next year to below 2% is because the recovery momentum of economic entities such as exports and consumption may slow down. Affected by factors such as increasing downward pressure on the global economy, the continuation of the Russia-Ukraine war, and the downturn in the semiconductor industry, South Korea's exports continued to slump. Against the backdrop of high commodity prices and a sluggish property market, consumption may also shrink.
In terms of CPI, excluding this year, the CPI rose by more than 3% for the first time since 2008 (4.7%). Although the central bank's CPI growth forecast for next year is slightly lower than last time, it still far exceeds the target value of 2%, which means that the central bank believes that the inflation trend will continue next year. The expected inflation rate, which reflects consumers' expectations about the price outlook, fell to 4.2% in November from 4.7% in July, but remained high.
In addition, the central bank maintained its GDP growth forecast for this year at 2.6%, and lowered its CPI growth forecast for this year from 5.2% to 5.1%. If the CPI rises more than 5% this year, it will be the highest since 1998 (7.5%). The central bank also predicts that GDP will grow by 2.3% and CPI will rise by 2.5% in 2024. (Finish)
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