[Weekly Outlook] Q2 GDP Release... IMF Revises South Korea Growth Forecast

Busan Port Sinsundae and Gammam Pier
[Image source=Yonhap News]

Next week, the second-quarter Gross Domestic Product (GDP) statistics and the International Monetary Fund (IMF)'s revised World Economic Outlook will be released. Amid rising inflation and global supply chain disruptions increasing domestic and international economic uncertainties, attention is focused on how much our growth and economic outlook have changed.

According to related government agencies on the 23rd, the Bank of Korea will announce the 'second-quarter real GDP' statistics (preliminary) on the 26th.

Quarterly growth rates recorded negative figures in the first (-1.3%) and second (-3.0%) quarters of 2020 due to the spread of COVID-19, followed by seven consecutive quarters of growth: 2.3% in the third quarter, 1.2% in the fourth quarter, 1.7% in the first quarter of last year, 0.8% in the second quarter, 0.2% in the third quarter, 1.3% in the fourth quarter, and growth continuing into the first quarter of this year.

However, in the first quarter, the Korean economy grew by only 0.6%, a 0.7 percentage point decline from the previous quarter. This was due to sluggish private consumption and investment caused by global supply bottlenecks and the Ukraine crisis.

Earlier, the Bank of Korea projected this year's economic growth rate at 2.7%. If the economy grows by 0.5% in the remaining quarters, the Bank of Korea's forecast can be met, but with the increasing possibility of a global economic slowdown, there is also a chance that the Bank of Korea will lower its outlook in the future.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, who is visiting Bali, Indonesia to attend the G20 Finance Ministers and Central Bank Governors Meeting, is shaking hands and greeting Kristalina Georgieva, Managing Director of the IMF, on the 16th (local time) at the Bali Nusa Dua Convention Center (BNDCC) before their meeting. Photo by Yonhap News

The International Monetary Fund (IMF) will release its revised World Economic Outlook on the 26th.

Previously, in April, the IMF downgraded South Korea's growth forecast from 3.0% to 2.5%. Given the ongoing Ukraine crisis, inflation, and supply chain instability, analysts expect the IMF to lower South Korea's growth forecast further.

Kristalina Georgieva, IMF Managing Director, recently met with Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho at the G20 Finance Ministers meeting and said, "The global economic outlook has darkened compared to April," adding, "South Korea's economic slowdown will not be as severe as that of major countries."

This effectively signals that both the global and South Korean economic growth rates will be revised downward. Deputy Prime Minister Choo also stated at the time, "The global economic slowdown could directly affect our country, which is highly dependent on external factors, so it is necessary to strengthen our capacity to respond to the complex crisis."

On the 27th, the Bank of Korea will release the 'July Consumer Sentiment Survey' results. In June, the expected inflation rate rose by 0.6 percentage points from the previous month to 3.9%, the highest level in 10 years and 2 months since April 2012 (3.9%).

Notably, the 0.6 percentage point increase is the largest since the related statistics began in 2008. At that time, the Bank of Korea explained, "The speed of the 0.6 percentage point increase is faster than in the past," estimating that it is due to more frequent exposure to news about inflation and the US big rate hikes than before.

With global inflation continuing, attention is focused on whether the expected inflation rate, which is approaching 4%, can regain stability.

On the 29th, Statistics Korea will announce the June Industrial Activity Trends. In May, industrial production and facility investment increased, but consumption slightly decreased.