Global IBs Lower South Korea's Growth Forecast to an Average of 1.6% for This Year

Eight Global IBs Lower Korea's 2024 GDP Forecast from 1.7% to 1.6%
JP Morgan Cuts Estimate to 1.2% Amid US Tariff Risks and Weak Domestic Demand
Consumer Price Inflation Forecast Raised from 1.8% to 1.9%

Global investment banks (IBs) have been consecutively lowering their growth forecasts for South Korea's real gross domestic product (GDP) this year. Some IBs have even issued negative projections, predicting that South Korea's economic growth rate will only reach 1.2% this year. Concerns over sluggish domestic demand, along with inflation worries due to high exchange rates and high oil prices, have also increased.

According to the International Finance Center on the 6th, the average growth forecast for South Korea's economy this year from eight global IBs stands at 1.6% as of the end of January. This is a 0.1 percentage point drop from the 1.7% average at the end of December last year. This level falls short of the government's early-year forecast (1.8%) and is at the lower end of the Bank of Korea's revised forecast of 1.6?1.7% announced on the 20th of last month. Concerns over an economic downturn have grown due to domestic political uncertainty and global trade conflicts stemming from U.S. tariff policies.

The most pessimistic forecast came from JP Morgan, which lowered its projection from 1.3% to 1.2% over the past month. In December last year, JP Morgan sharply downgraded its forecast for South Korea's economic growth this year from 1.7% to 1.3%, citing sluggish domestic demand amid political uncertainty, and has now lowered it once again this month. Additionally, Citi adjusted its forecast from 1.6% to 1.4%, and Barclays from 1.8% to 1.6%. UBS maintained its forecast at 1.9%, Bank of America and Goldman Sachs at 1.8%, and HSBC and Nomura at 1.7% each.

The average forecast from global IBs was revised downward from 2.1% at the end of September last year to 2.0% at the end of October, right after confirming a decline in exports in the third quarter. Since then, it has been declining for four consecutive months through the end of January this year.

Inflation forecasts, however, have risen compared to a month ago. The average forecast for South Korea's consumer price inflation rate this year from the eight IBs increased by 0.1 percentage points from 1.8% at the end of December last year to 1.9% at the end of January this year. Barclays raised its forecast from 1.8% to 1.9%, and Nomura from 1.7% to 1.8%. JP Morgan and HSBC maintained their forecasts at 2.0%, Citi and UBS at 1.9%, Bank of America at 1.8%, and Goldman Sachs at 1.6%.

The day before, Statistics Korea announced that the consumer price index for January this year was 115.71 (2020=100), marking a 2.2% increase compared to a year earlier. This is the highest inflation rate since July last year (2.6%).