ADB Maintains South Korea's Growth Rate at 2.2% and Inflation Rate at 2.5%

2024 Asia Economic Outlook

Due to the surge in agricultural product prices, especially fruits, consumer prices, which had stabilized at 2.8% in January, returned to the 3% range within a month. On the 6th, apples were displayed at the fruit stand of Hanaro Mart Yangjae branch in Seocho-gu, Seoul. Photo by Jinhyung Kang aymsdream@

The Asian Development Bank (ADB) has maintained South Korea's GDP growth forecast for this year at 2.2%, the same as the projection made in December last year. The consumer price inflation rate for this year (2.5%) was also kept unchanged.

On the 11th, in its "Asian Economic Outlook 2024," ADB announced, "South Korea's growth rate is expected to record 2.2% this year and 2.3% next year as initially forecast, driven by sustained global semiconductor demand due to the expansion of artificial intelligence (AI) services and cloud server industries, as well as a consumption recovery in the second half of the year."

Regarding inflation, ADB anticipated a gradual stabilization to 2.5% this year and 2.0% next year, supported by the continuation of tight monetary policy, government efforts to stabilize prices such as partial exemption and reduction of tariffs on some fruits.

For the Asian region, the growth rate for this year was revised upward by 0.1 percentage points to 4.9% compared to the previous forecast. This was attributed to export recovery driven by the end of global interest rate hikes and a semiconductor cycle turnaround, as well as investment-led growth in India, despite the economic slowdown in China. The growth rate for Asia next year is also expected to remain robust at 4.9%.

However, ADB pointed out that external uncertainties such as worsening geopolitical conflicts in the Middle East, uncertainties in U.S. monetary policy, contraction in China's real estate market, and the possibility of abnormal climate events pose downside risks.

Inflation in the Asian region is projected to ease moderately to 3.2% this year and 3.0% next year due to stable energy prices and continued monetary tightening.

ADB stated, "The AI boom is leading the rebound of the semiconductor industry in the Asian region, and its impact varies according to each country's specialized sectors," adding, "South Korea is benefiting from the surge in AI-related memory chip demand as a leading supplier of memory chips, which account for about 50% of its total semiconductor exports this year."

For other major semiconductor powerhouses such as Taiwan and China, ADB diagnosed that the impact of AI-driven demand expansion has been relatively limited so far, as the proportion of memory chips in their semiconductor exports is comparatively low.