Next Year's Growth Rate 3.2%... "Insufficient Basis for Recovery, Quite Optimistic"

Growth Rate Forecast -1.1% This Year... Full-Scale Consumption Rebound Expected Next Year
Increased Expectations for Early Vaccine Commercialization

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance (center), is leaving after concluding the joint briefing on the "2021 Economic Policy Direction" held at the Government Seoul Office in Sejong-ro, Jongno-gu, Seoul, on the afternoon of the 17th. From the left, Deputy Prime Minister Hong Nam-ki, Minister of Employment and Labor Lee Jae-gap, and Minister of SMEs and Startups Park Young-sun. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Jang Sehee] As the government forecasts South Korea's economic growth rate at 3.2% for next year, there are criticisms that this figure does not reflect the possibility of raising social distancing to level 3, making additional adjustments virtually inevitable.

On the 17th, the government presented the economic growth rate forecast of 3.2% for next year through the '2021 Economic Policy Direction.' Even considering the base effect from this year's negative growth (-1.1%), this forecast exceeds those of the Korea Development Institute (3.1%), the Bank of Korea (3.0%), and the Organisation for Economic Co-operation and Development (2.8%). It anticipates a full-scale rebound in consumption starting in the second half of next year.

Regarding this, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki responded to criticisms that the growth forecast was somewhat optimistic by saying, "While the development of the COVID-19 situation remains uncertain, expectations for early commercialization of vaccines have recently increased," and added, "We presented the economic growth forecast for next year as 3.2%, and we believe it is fully achievable."

However, the government's forecasted economic growth rate for next year (3.2%) does not incorporate the possibility of raising social distancing to level 3. Additionally, it assumes a scenario where vaccinations begin early next year, so variables still remain. Accordingly, the government states that if social distancing is raised to level 3, further adjustments will be necessary.

Academics point out that considering the worsening spread of COVID-19, the 3.2% forecast is overly optimistic.

Professor Kim So-young of Seoul National University’s Department of Economics said, "It does not seem likely that COVID-19 will end by next summer," and added, "With concerns about a fourth wave, the growth forecast appears to be excessively optimistic."

Professor Lee In-ho of Seoul National University’s Department of Economics said, "If the decline this year is less severe, the growth next year might not be as high," and added, "The basis for recovery is unclear." He also noted, "Given South Korea's high dependence on overseas markets, the pace of economic recovery could be slower."

Meanwhile, the government forecasted this year's growth rate at -1.1%, considering the contraction of domestic and international economic activities due to the COVID-19 crisis.