Korean economy to grow slower than expected this year: Think tank

Korea's economy is expected to grow at a slower-than-expected pace in 2022 due to sluggish consumer spending and corporate investment, a private think tank said Monday.

In its second-quarter economic forecast, the Korea Economic Research Institute (KERI) said Asia's fourth-largest economy will likely gain 2.4 percent in 2022 from a year earlier, compared with a 2.5 percent forecast made three months earlier.

The local economy is estimated to have expanded 2.9 percent on year in the first half of the year, with the second-half economic growth likely to reach 2.1 percent.

KERI, the research arm of the country's conglomerate lobby Federation of Korean Industries, projected private spending to grow 3.2 percent this year, down from the 3.6 percent increase a year earlier.

The slowdown in consumer spending is attributable to a recent spike in inflation and rising interest rates that have put a greater burden on household debt servicing, it said.

In June, the country's consumer prices soared 6 percent on year, the fastest rise in nearly 24 years, due to high energy and food costs.

In a July rate-setting meeting, the Bank of Korea (BOK) hiked its benchmark interest rate to 2.25 percent from 1.75 percent to cope with galloping inflation.

KERI forecast the country's corporate capital spending to shrink 2.8 percent in 2022 from a year earlier due to prolonged global supply chain disruptions and slowing growth in major economies, a sharp turnaround from a 8.3 percent surge a year earlier.

The think tank said Korea's consumer inflation is likely to reach 5.3 percent this year, the highest level in 20 years.

The country's current account surplus is predicted to drop sharply to $48 billion this year from last year's $88.3 billion black ink due to surging imports and a wider deficit in the service account, which includes outlays by Koreans on overseas trips and transport earnings, it added.

Yonhap