The Bank of Korea Forecasts 5% Growth for China and 2-3% for Japan This Year

Announcement of 'Overseas Economic Focus' on the 2nd
Recovery Continues Centered on Private Consumption

[Asia Economy Reporter Jang Sehee] This year, major countries such as China and Japan are expected to continue their growth centered on private consumption.

On the 2nd, the Bank of Korea stated in the 'Overseas Economic Focus' report, "China's gross domestic product (GDP) growth rate is expected to slow to around 5% this year," and "major institutions expect Japan to record a growth rate in the 2-3% range."

First, China is expected to see its growth rate fall to around 5% due to sluggishness in the real estate sector and strong quarantine measures. Consumer prices are expected to rise around 3% annually as the upward trend expands in the second half of the year due to consumption recovery. The Bank of Korea said, "The Chinese government plans to strengthen fiscal policy support and operate monetary policy stably in anticipation of a slowdown in China's economic growth."

The Bank of Korea stated, "China's economy will show a growth rate of 5%, lower than around 8% in 2021, amid ongoing policies to strengthen the long-term qualitative growth foundation such as common prosperity, carbon peak, and carbon neutrality."

In the first half of the year, growth is expected to slow due to strong quarantine measures, sluggishness in the real estate sector, and base effects. However, in the second half, growth is expected to improve as consumption recovery centered on face-to-face services accelerates with the easing of quarantine measures.

Since the third quarter of last year, China’s growth has slowed due to power shortages, soaring raw material prices, and the Evergrande crisis. In particular, investment and consumption have weakened since the second half of last year. The Bank of Korea analyzed that the delay in infrastructure investment recovery was influenced by increased uncertainty from regulatory tightening and the Evergrande crisis. Consumption sentiment is also subdued due to strengthened quarantine measures.

However, employment is improving with economic recovery, as the number of new jobs increases and the unemployment rate declines. The nationwide surveyed unemployment rate in November was 5.0%, continuing improvement since February 2021 (5.5%).

The Japanese economy is expected to show positive growth in the 2-3% range, supported by increased global demand and improved private consumption.

The Bank of Korea said, "Thanks to expanding global demand and private consumption recovery, a gradual improvement trend is expected," but added, "However, uncertainty about the growth path remains high due to the possibility of a COVID-19 resurgence."

On the demand side, exports are expected to continue increasing, and facility investment and private consumption are expected to recover with expanded economic activities. In particular, exports are expected to continue rising due to strong performance in information and communication technology (IT)-related digital products and improvements in the automobile sector.