Banks raise outlook for GDP growth to 2.5%Global investment banks are more optimistic about Korea’s economic growth this year as several indicators including exports and job numbers have been favorable in recent months.
Ten firms have raised their projection of GDP growth this year to an average 2.5 percent as of the end of March, according a report released Monday by the Korea Center for International Finance. The forecast is 0.1 percentage point higher than the 2.4 percent average in February.
Morgan Stanley raised its projection from 2 percent to 2.4 percent, while Barclays revised it from 2.3 percent to 2.5 percent and JPMorgan from 2.3 percent to 2.5 percent.
Bank of America Merrill Lynch had the highest estimate of 2.9 percent, followed by BNP Paribas with 2.8 percent.
Still, there were some banks that projected Asia’s fourth-largest economy might expand below 2.5 percent, including Citibank and Deutsche Bank, which forecast 2.4 percent growth. Some like Japan-based Nomura had a more conservative outlook, projecting 2 percent growth.
UBS was the only bank that lowered its projection, from 2.5 percent to 2.4 percent.
The changed outlook is a response to several positive indicators that suggest steady economic recovery. Korea’s exports have been increasing year on year for the past five months mostly thanks to rising demand in semiconductors, which are vital components in computers and smartphones. In March, Korea’s exports rose 13.7 percent year on year to $48.9 billion.
The upbeat report has led to more hiring. April is expected to be the first time in four months that new jobs will exceed 350,000.
In a report released Friday, the Korea Trade-Investment Promotion Agency speculated the current recovery momentum will continue into the second half despite shrinking shipments to Korea’s largest export market, China, which has been imposing trade restrictions on Korean companies in protest of deployment of a controversial U.S. missile shield on the Korean Peninsula.
The agency said the decline in exports to China will likely be covered by shipments to the United States, where the market has high hopes for President Donald Trump’s economic stimulus package.
The release of Samsung Electronics’ latest smartphone, the Galaxy S8, is expected to further boost Korea’s export figures in the April-June quarter.
Foreign investment banks weren’t the only ones revising their projections. Local think tanks have been making changes as well.
The Korea Economic Research Institute last month raised its forecast for this year to 2.5 percent from 2.1 percent, and the state-run Korea Development Institute is reportedly considering revising its outlook from the current 2.4 percent.
The Korean central bank, too, is likely to raise its 2.5 percent forecast when it announces new projections next month.
BY LEE HO-JEONG [firstname.lastname@example.org]
with the Korea JoongAng Daily
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