Average Growth Forecast for South Korea's Economy in 2024 by 8 Global IBs is 1.7%
JPMorgan Lowers Forecast to 1.3%, Significantly Below Bank of Korea (1.9%) and Government (1.8%)
Concerns Rise Over Domestic Demand Weakness Due to Political Instability
Participants gathered near the Presidential Residence in Yongsan-gu, Seoul, on the 6th. Photo by Kang Jin-hyung
The average forecast for South Korea's economic growth rate this year by major global investment banks (IBs) was 1.7%. Some IBs even issued negative projections, predicting that South Korea's economic growth would be as low as 1.3% this year.
According to the International Finance Center on the 7th, the average economic growth rate forecast for South Korea from eight major global IBs was 1.7%. This figure is below South Korea's potential growth rate of 2.0% and is somewhat lower than the Bank of Korea's forecast of 1.9% and the government's forecast of 1.8% for this year.
The most pessimistic forecast came from JP Morgan, which sharply downgraded its growth projection from 1.7% to 1.3%. JP Morgan pointed out that domestic political uncertainty has caused a sharp drop in consumer sentiment, weakening the domestic demand sector, and that the slower-than-expected recovery in domestic demand is expected to continue to be sluggish.
Citi forecasted the next lowest growth rate at 1.6%. They noted that private consumption is expected to rise quarter-on-quarter in the first quarter due to interest rate cuts and increased fiscal spending, but ongoing political uncertainty and psychological deterioration caused by major disasters could result in a weaker-than-expected rebound in private consumption.
Nomura Securities and HSBC both predicted South Korea's economic growth rate at 1.7% this year. Nomura observed that with the continuation of a strong dollar environment due to sustained high U.S. interest rates and tariff concerns, and the opposition party pushing for an early presidential election, political uncertainty is intensifying, which could lead to a sluggish domestic economic fundamental.
Goldman Sachs, Barclays, and Bank of America-Merrill Lynch (BoA-ML) forecasted 1.8%, matching the government’s projection. Goldman Sachs evaluated that although domestic political instability is expected to continue for some time, the passage of this year’s budget, swift market stabilization measures, and announcements of economic policy directions have reduced policy uncertainty, which is positive. They also added that the appointment of Choi Sang-mok, the Acting Prime Minister and Minister of Strategy and Finance, as a Constitutional Court Justice contributed to easing political uncertainty. The Bank of Korea is expected to cut the base interest rate by 0.25 percentage points each from the first quarter to the second quarter and again in the upcoming third quarter.
Barclays diagnosed that South Korea’s economic sentiment is shrinking due to political shocks, which could accelerate the Bank of Korea’s pace of interest rate cuts. They argued that the Korean economy was already facing structural domestic demand weakness before the martial law situation, and considering the risks of the Trump administration’s trade policies, the importance of stimulating domestic demand next year is greater than ever.
The economic growth forecasts for South Korea this year by IBs were significantly lower compared to major Asian countries. While South Korea is expected to grow by 1.7%, Hong Kong is forecasted at 2.0%, Taiwan at 2.9%, Singapore at 2.6%, Thailand at 2.8%, Indonesia at 5.0%, the Philippines at 6.0%, and Vietnam at 6.6%.
IBs also expected South Korea’s economy to grow by an average of 1.8% next year. This would mark the first time since related statistics have been compiled that South Korea records two consecutive years of growth in the 1% range. Next year’s growth forecasts for South Korea are 2.1% by Goldman Sachs and JP Morgan, 1.9% by HSBC, 1.8% by Nomura, 1.6% by Citi, 1.5% by Barclays, and 1.3% by UBS, respectively.
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