KDI's 2024 growth forecast unchanged at 2.2%, inflation projection falls

Economy

Published: 14 Feb. 2024, 15:16

KDI's 2024 growth forecast unchanged at 2.2%, inflation projection falls

Korea Development Institute (KDI) on Wednesday kept Korea’s 2024 growth forecast unchanged at 2.2 percent, but slightly revised down the inflation outlook. People shop for food at a supermarket in Seoul on Monday. [YONHAP]

The state-run Korea Development Institute (KDI) on Wednesday kept Korea’s 2024 growth forecast unchanged from November at 2.2 percent, but slightly revised down the inflation outlook.

The KDI’s projection is lower than that of the International Monetary Fund, which inched up its forecast for the nation's growth to 2.3 percent in January.

The institute said the economy performed as expected in the second half of 2023, and anticipates the same this year.

The KDI inched down the country’s inflation forecast to 2.5 percent from the previous 2.6 percent, citing slowing growth of private consumption.

Core inflation, excluding volatile food and energy prices, is also expected to slow to 2.3 percent from the previous 2.4-percent forecast.

It would be difficult to expect a recovery in private consumption due to the high interest rate that is likely to remain in place, said Jung Kyu-chul, director of the KDI’s office of macroeconomic analysis and forecasting.

The think tank noted the expansion of geopolitical risks in the Middle East region and the dramatic collapse of China's economy centered on the real estate sector as some of the risks Korea faces.

Tensions in the Middle East could raise global oil prices and disrupt global supply chain networks, which would advance production costs, the KDI said. If China faces a plunge in its real estate market that triggers an economic recession, Korea’s exports could be negatively affected, it added.

The nation's economy “will depend on how rapidly China’s economic growth slows. If it heads toward a direction we had not anticipated, [Korea’s] economic growth may fall to as low as around 2 percent,” Jung said.

Domestically, Korea faces risks in the construction sector as the delinquency rate of real estate project financing loans has risen amid the sagging real estate market.

“The chance that ongoing restructuring of construction companies will turn into a systematic financial risk is small, but it’s difficult to exclude the possibility of its negative impacts in the future, like a liquidity crunch, and on the real economy,” the KDI added.

BY JIN MIN-JI [jin.minji@joongang.co.kr]