[Financial Policy Committee poll] ② Growth Rate Forecast Expected to Be Revised Down from 1.7% to 1.5%

Impact of Export Slump and Consumer Slowdown

[Asia Economy Reporter Seo So-jeong] Experts have expressed opinions that the Bank of Korea will revise downward the economic growth rate in its updated economic outlook to be announced on the 23rd. In November last year, the Bank of Korea projected this year's growth rate at 1.7%, but 85% of economic experts expected it to be lowered.

On the 21st, Asia Economy conducted a survey targeting domestic and foreign securities analysts, bank and economic research institute researchers. Out of 20 respondents, 17 (85%) answered that the Bank of Korea would revise the growth rate downward this month. The largest group, 6 respondents, expected a 0.2 percentage point decrease to 1.5%, followed by 4 respondents expecting 1.6%, and 3 respondents expecting 1.4%.

Yoon Yeo-sam, a researcher at Meritz Securities, said, "While external economies are shedding recession concerns and expectations for improvement are growing, the domestic atmosphere is rather downwardly adjusted. It is difficult to expect benefits from China's reopening as exports to China continue to decline, and consumption expansion focused on goods in advanced regions is limited, so the positive factors for the domestic economy are not significant."

Kim Ji-na, a researcher at Eugene Investment & Securities, also said, "I expect the growth rate forecast to be lowered by 0.1 to 0.2 percentage points from the previous 1.7% to the mid-1% range," adding, "Although there is a possibility of external economic improvement, recent export sluggishness continues, and the consumption growth trend has also slowed."

Park Jung-hyun, a researcher at Woori Financial Management Research Institute, holds the view that the Bank of Korea's forecast will be maintained. Park said, "Despite sluggish exports and investments due to the global economic slowdown, the domestic economy is expected to achieve a soft landing thanks to the easing of high inflation and high interest rate factors and government policy effects." On the other hand, Nomura Securities presented a pessimistic view that this year's growth rate could fall to -0.4%. Park Jung-woo, an economist at Nomura Securities, said, "The government's first official diagnosis that the Korean economy has entered a slowdown phase has recently been announced, and looking at January's credit card usage, consumption recession is progressing more sharply than expected," adding, "Exports will continue to be sluggish for the time being, domestic demand will also weaken, and negative growth will be recorded."

Recently, major institutions have successively lowered their growth rate forecasts for South Korea. The International Monetary Fund (IMF, 1.7%), the Organisation for Economic Co-operation and Development (OECD, 1.8%), Fitch (1.9%), the Korea Development Institute (KDI, 1.8%), and the Korea Economic Research Institute (1.5%) have all lowered their growth rate expectations.

Regarding this year's inflation rate forecast, the most common response was 3.5%, which is 0.1 percentage points lower than the Bank of Korea's forecast of 3.6%, with 6 respondents. Five economic experts expected 3.6%, closely aligning with the Bank of Korea's outlook. Baek Yoon-min, a researcher at Kyobo Securities, said, "As oil prices fall and consumption slows, inflation is expected to gradually ease, but upward factors remain due to public utility fee increases and China's reopening, so the inflation rate is expected to be similar to the Bank of Korea's forecast."

Gong Dong-rak, a researcher at Daishin Securities FICC Research Department, said, "The Bank of Korea is expected to revise downward this year's growth rate but maintain the inflation forecast," adding, "While the interest rate level as a bulwark against inflation has already been secured through cumulative hikes since August 2021, the pressure of economic slowdown following high inflation is increasing, so the monetary authorities' focus will gradually shift from inflation to the economy."