Forecasts for economy keep rising

Finance Minister Hong Nam-ki expressed confidence on the Korean economic recovery. [YONHAP]

Korea is still struggling from Covid-19 but economic recovery is nigh.

The Asian Development Bank (ADB) on Wednesday predicted Korea’s economy will expand 3.5 percent this year, an improvement over the 3.3 percent projected in December.

The ADB joined a number of think tanks raising Korea’s outlook. The International Monetary Fund (IMF) in March raised its projections of Korea’s growth this year to 3.6 percent from an earlier projection of 3.1 percent.

The Organization for Economic Development and Cooperation (OECD) predicts Korea’s economy will expand 3.3 percent this year.

While the Bank of Korea (BOK) has not revised its outlook, its governor Lee Ju-yeol earlier this month told reporters that the Korean central bank will likely raise its projection for this year’s growth above 3 percent.

The projection by the BOK in February was 3 percent year-on-year growth.

The ADB cited the government’s accommodative monetary and fiscal policies as well as a rebound in exports led by IT and electronics.

Improvements in domestic consumption and fixed investments were additional contributing factors.

However, it described Covid-19 as the biggest downward risk.

“The pace of economic recovery will depend heavily on the timely rollout of vaccinations and pandemic containment,” the ADB report said. “Even small outbreaks pose a constant threat because they rattle business and consumer confidence.”

It also raised concerns about rising unemployment, which surged 5.4 percent in January. That month, the number of job losses was the largest in 21 years.

The ADB’s report came a day after the BOK announced first quarter growth, which showed a faster-than-expected recovery.

In the first three months of this year, the economy grew 1.8 percent year-on-year, a turnaround from three consecutive quarters of decline.

The first quarter results exceeded a market consensus of 1.1 percent year-on-year growth.

Finance Minister Hong Nam-ki stressed the first quarter achievement during a press conference Wednesday.

Hong noted that the first quarter results were especially significant since there was balanced growth in all sectors: exports, domestic consumption and investment and government spending.

“It is the first time that all four sectors saw 'balanced' growth since the Covid-19 crisis started,” Hong said. “This is an achievement that resulted from joint efforts by all economic participants: households, companies and the government.”

He noted that economic growth, which has beaten the market consensus for two consecutive quarters, was proof of a rapid recovery of the Korean economy.

Hong also stressed that the net inflows of foreign investment, especially in bonds, shows the confidence of foreign investors in the Korean economy.

“The government will increase efforts to achieve economic growth in the mid-to-upper 3 percent range,” Hong said.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]