On the morning of the 25th, a briefing on the preliminary real Gross Domestic Product (GDP) for the first quarter of 2024 was held at the Bank of Korea in Jung-gu, Seoul. From the left in the photo: In-gyu Lee, Head of the National Income Expenditure Team; Seungcheol Shin, Director of the Economic Statistics Bureau; Changgu Kang, Head of the National Income General Team; and Hyunjung Jeon, Manager of the National Income General Team. (Photo by Bank of Korea)
Global investment bank JP Morgan has significantly raised its forecast for South Korea's economic growth rate this year from 2.3% to 2.8%.
JP Morgan released a report on the 25th, evaluating that South Korea's economic growth rate in the first quarter greatly exceeded expectations.
On the same day, the Bank of Korea announced that the preliminary real gross domestic product (GDP) growth rate for the first quarter of this year was 1.3% quarter-on-quarter. This figure far surpassed market expectations.
JP Morgan analyzed that the contribution of net exports to growth and the manufacturing sector's performance remained robust as expected, and domestic demand (private consumption and construction) showed much stronger performance than anticipated. In particular, the growth rate exceeded expectations due to a significant increase in construction investment.
It is expected that the contribution of net exports to growth will continue throughout the year. However, the extent of this contribution may decrease compared to the second half of last year. The growth rate of domestic demand is expected to undergo a temporary adjustment in the second quarter and then gradually recover through the second half of the year.
JP Morgan predicted that although the strong growth in the first quarter may lead to a moderate GDP growth rate in the second quarter, steady growth will continue through the second half, resulting in an overall economic growth rate of 2.8% for this year. This is a 0.5 percentage point upward revision from the previous 2.3% forecast.
The strong growth in the first quarter also raises the possibility of a delay in the timing of the base interest rate cut. Park Seok-gil, head of JP Morgan Korea, explained, "Considering the growth and inflation situation, we postponed the Bank of Korea's first rate cut forecast from the third quarter to the fourth quarter of this year," adding, "Today's first quarter GDP data confirmed this possibility."
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