Major Global IBs Raise South Korea's Growth Forecast to 4.1% This Year

Existing GDP Growth Forecast Revised from 3.8% to 4.1%
Impact of Accelerated US Economic Recovery and Semiconductor Boom

[Asia Economy Reporter Eunbyeol Kim] Major investment banks (IBs) have forecast that South Korea will grow by 4.1% this year. This is a 0.3 percentage point upward revision from the 3.8% forecast made at the end of March. The rapid vaccine rollout in the United States has led to a faster-than-expected economic recovery, boosting exports, and South Korea's key semiconductor industry is experiencing a boom, contributing to this outlook.

According to the International Finance Center on the 9th, the real gross domestic product (GDP) growth rate forecast for South Korea this year by nine global IBs was 4.1% as of the end of April. The IBs providing these forecasts include Barclays, Bank of America Merrill Lynch (BoAML), Citi, Credit Suisse, Goldman Sachs, JP Morgan, HSBC, Nomura, and UBS.

These nine institutions, which release monthly forecasts for South Korea's economic growth rate, have continuously raised their projections for this year since December last year. In October and November last year, they expected South Korea's economy to grow by 3.3% this year, then revised it to 3.4% in December, 3.5% in January, 3.6% in February, and 3.8% in March, increasing the forecast by 0.1 to 0.2 percentage points each month. In April, they made a significant upward revision of 0.3 percentage points, expecting South Korea's growth rate to exceed 4%.

Looking at the growth rate forecasts from the nine IBs individually, UBS maintained the highest forecast at 4.8%. JP Morgan expected South Korea's growth rate to reach 4.6% this year, while Goldman Sachs (4.4%), Credit Suisse (4.2%), and Barclays (4.1%) also forecast growth exceeding 4%.

Meanwhile, the nine IBs also raised their growth rate forecasts for five Asian countries including Singapore, Taiwan, Hong Kong, and Malaysia, in addition to South Korea.

Singapore's industrial production in March increased by 7.6% year-on-year, significantly exceeding the expected 3.0%, due to the semiconductor boom, and the unemployment rate fell to 2.9% in the first quarter. Reflecting this, Singapore's growth forecast was raised by 0.7 percentage points from 6.5% to 7.2%. Taiwan's growth forecast was revised upward by 0.7 percentage points to 6.0%, and growth forecasts for Hong Kong (5.1%) and Malaysia (6.0%) were also raised.

On the other hand, growth forecasts for four Asian countries?India, the Philippines, Thailand, and Vietnam?were revised downward. India is facing an uncontrollable situation as new COVID-19 cases exceed 300,000 daily, with delayed vaccine rollout (vaccination rate 2.2%) and strengthened lockdown measures inevitably leading to contraction in consumption and investment. India's growth forecast for this year was lowered from 11.3% to 10.4%.