[Geumtongwi poll]② "Achieving 2% Growth Rate for Korea Next Year Is Difficult"

8 out of 10 Experts Predict "Growth Rate Below 2% Next Year"
Half of Experts Expect 2.2% Economic Growth This Year
Growth Rate May Decline and Inflation Rise with Trump's Second Term
Key Future Monetary Policy Variables: Exchange Rate, Household Debt, Trump, Growth Rate

With the Bank of Korea's base interest rate decision and economic outlook announcement scheduled for the 28th, the majority of experts forecast that South Korea's economic growth rate will record around 2% or in the high 1% range next year. This year, half of the experts expected the economy to grow by 2.2%.

According to a survey conducted by Asia Economy from the 18th to the 22nd among 20 economic experts from domestic and international economic research institutes, major securities firms, and banks, 80% (12 out of 15 respondents) predicted that South Korea's economic growth rate next year will be 2% or below.

A majority of 53% (8 respondents) expected the economic growth rate next year to fall short of 2%. Excluding the 4 respondents who predicted 2.0%, the others forecasted 1.9% (2 respondents), 1.8% (3 respondents), and 1.7% (3 respondents).

Among the 3 respondents who expected the economic growth rate to exceed 2%, 2 predicted 2.1% and 1 predicted 2.2%.

Experts stated that they have revised downward this year's and next year's economic growth forecasts due to the third quarter real Gross Domestic Product (GDP) falling short of expectations, as well as tariff risks stemming from Trump and China's economic slowdown.

Researcher Jo Yong-gu of Shin Young Securities said, "Previously, we expected a growth rate of 1.9-2.0%, but considering the impact of Trump's tariff increase policy, we adjusted it to 1.8%. Under the worst negative scenario, there is a possibility of deterioration to 1.6%."

Researcher Park Sang-hyun of iM Securities explained, "Due to tariff risks from Trump and pressure from China's economic slowdown, we have lowered next year's economic growth rate forecast to 1.7%."

This year, 50% (8 out of 16 respondents) forecasted an economic growth rate of 2.2%. Among the remaining respondents, 5 predicted 2.3%, 2 predicted 2.1%, and 1 predicted 2.4%.

If Trump's pledges materialize... "The impact on the Korean economy will be significant"

Experts expect that if Trump's pledges materialize, the economic growth rate will decline and inflation will rise, causing significant damage to the Korean economy.

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Joo Won, head of the Economic Research Department at Hyundai Research Institute, said, "If the US-China tariff war breaks out, South Korea's economic growth rate will decrease by 0.5 percentage points, and if the tariff war spreads globally, the growth rate could shrink by up to 1.1 percentage points." He emphasized, "It is necessary to establish a proactive and effective public-private response system to cope with the possibility of rapid changes in the global trade environment."

Researcher Ahn Jae-kyun of Shinhan Investment Corp. said, "The key is whether a universal 10% tariff is introduced and whether retaliatory measures from counterpart countries occur." He added, "Since the actual implementation of Trump's policies is expected after the second half of next year, it is unlikely to cause immediate growth sluggishness in Korea, but from a medium-term perspective, it will weaken growth and affect inflation."

He continued, "Restoring the multilateral trade order and establishing a stable trade environment are most important for Korea," and suggested, "Efforts to somewhat mitigate America First policies through solidarity and cooperation with middle powers outside the G2 are necessary."

Senior Researcher Kim Wan-jung of Hana Financial Management Research Institute diagnosed, "With the launch of Trump's second administration, our economic growth rate may decline and exports may adjust. Although there is a need to expand the scope of interest rate cuts, this will be possible on the premise that household debt and exchange rates remain stable."

Key variables for monetary policy: 'Exchange rate, household debt, Trump, economic growth rate'

The biggest variables for future monetary policy were identified as the exchange rate, household debt, key policies of Trump's second term, and economic growth rate. 60% (12 experts, multiple responses allowed) cited the exchange rate as the biggest variable. Additionally, 35% (7 experts) each named household debt, key policies of Trump's second term, and economic growth rate as major variables.

Researcher Kim Sung-soo of Hanwha Investment & Securities explained, "Trump's key policies, economic growth rate, and exchange rate issues should all be viewed in the same context. Economic growth and exchange rates will be greatly affected depending on Trump's policies."

Researcher Baek Yoon-min of Kyobo Securities said, "From a fundamental perspective, the conditions for the Bank of Korea's monetary easing have already been met. However, due to variables such as increasing household debt and exchange rates, it is difficult to lower the base interest rate considering only cyclical factors."

Researcher Yoon Yeo-sam of Meritz Securities explained, "Externally, the realization and impact of Trump's policies are the most important variables. Domestically, if next year's growth rate in the 1% range slows further due to Trump risks, the pressure on policy authorities to respond will increase. However, the rise in exchange rates is the biggest risk factor for monetary easing, but attention should be paid to the Bank of Korea governor's remarks that volatility is more important than the level of exchange rates."

Additionally, 20% (4 experts) cited the timing of additional US interest rate cuts, and 10% (2 experts) cited consumer prices as major variables.

Researcher Ahn said, "The Bank of Korea's top priority is price stability, and uncertainty should be checked mainly around international oil prices and exchange rates." He evaluated, "The ranking of major variables changes depending on whether prices show stability within 2%."

Researcher Jo said, "Due to the structure of our economy, external factors are more important than internal ones, so Trump's policies and the possibility of changes in the Federal Reserve's policy stance are the most important. Among domestic price variables, the exchange rate will be the most important, and overall, the economy, inflation factors, and exchange rates are expected to have a conflicting relationship."