ADB, South Korea's Growth Forecast for Next Year Revised from 2.3% to 1.5%... Darker Economic Outlook

Next Year's Inflation Rate Forecasted at 3.2%... "Impact of Global Economic Slowdown and Rising Energy Prices"

[Asia Economy Sejong=Reporter Kwon Haeyoung] The Asian Development Bank (ADB) on the 12th downgraded South Korea's economic growth forecast for next year to 1.5%. Amid the triple high (high inflation, high interest rates, and high exchange rates) complex crisis, global interest rate hikes and economic slowdown are expected to sharply weaken the domestic economy, leading major domestic and international institutions to consecutively release growth forecasts in the 1% range.

ADB presented South Korea's growth rate for next year at 1.5%, down from the previous September forecast of 2.3%. This marks a 0.8 percentage point cut in growth rate within three months. ADB releases its annual outlook in April and subsequently provides supplementary and revised forecasts three times in July, September, and December.

ADB explained that the reason for the downward revision of the economic outlook is the weakening of the external sector due to the global economic slowdown and rising energy prices. Accordingly, following the Bank of Korea (1.7%), Korea Development Institute (KDI, 1.8%), and the Organisation for Economic Co-operation and Development (OECD, 1.8%), ADB also presented a growth rate in the 1% range.

South Korea's inflation rate forecast for next year was raised to 3.2%, up 0.2 percentage points from the previous forecast.

The growth forecast for this year was maintained at 2.6%, while the inflation rate was raised by 0.6 percentage points to 5.1%, reflecting increases in oil prices and food prices.

[Image source=Yonhap News]

The growth rate for Asian developing countries (46 countries) is expected to be 4.2% this year and 4.6% next year, down 0.1 percentage points and 0.3 percentage points respectively from the previous forecast. Inflation is projected at 4.4% this year, down 0.1 percentage points, and 4.2% next year, up 0.2 percentage points. This is attributed to rising energy and food prices, with inflation levels expected to remain higher than before the Ukraine crisis.

ADB downgraded the growth rates of Asian regional countries including South Korea, citing risk factors such as ▲China's economic slowdown ▲the Ukraine crisis ▲global economic recession.

ADB stated, "China's economy is burdened by limited household consumption recovery due to COVID-19 lockdowns and instability in the real estate market, which hampers economic recovery," and added, "Supply shocks caused by geopolitical instability such as the Ukraine crisis and the global economic slowdown will weaken the external sectors of major Asian countries, including exports." Furthermore, "As monetary tightening continues in major countries such as the United States and Europe, financial market conditions in the Asian region are also continuously affected," highlighting that tightening in major countries is a downside risk factor for the global economy.