KDI ups growth forecast to 2.6 percent as exports surge

Economy

Published: 16 May. 2024, 13:44

KDI ups growth forecast to 2.6 percent as exports surge

Korea Development Institute (KDI) Senior Fellow Jung Kyu-chul, director of the office of macroeconomic analysis and forecasting, speaks during a press conference at the Sejong government complex on Thursday. [KDI]

Korea’s state-run economic think tank steeply upped the country’s growth forecast for this year from the previous 2.2 percent to 2.6 percent, citing robust exports.

Compared to its projection in the previous report released in February, the Korea Development Institute (KDI) lifted the growth forecast by 0.4 percentage points in its economic for the first half of this year, published Thursday. Its inflation forecast for the year inched up by 0.1 percentage points to 2.6 percent.

The KID's projection is in line with the Organisation for Economic Cooperation and Development (OECD)’s forecast of 2.6 percent and higher than the International Monetary Fund’s April prediction of 2.3 percent.

The OECD revised its projection in May, lifting the estimated figure by 0.4 percentage points.

“Driven by the surging exports, the Korean economy has been improving at a steady pace,” the KDI said in its report, citing stronger-than-expected GDP growth in the first quarter. Korea’s GDP expanded 1.3 percent in the January-March period from the previous quarter, according data the Bank of Korea released on April 25 — the steepest growth since the 1.4 percent posted in the fourth quarter of 2021, and far outpacing the market estimate of 0.6 percent.

On a yearly basis, the economy grew 3.4 percent in the first quarter.

The KDI pointed out that the robust chip demand has boosted overall economic growth in the first quarter while domestic demand remained sluggish amid high interest rates.

Meanwhile, the institute projected consumer prices to rise 2.6 percent this year — up 3.0 percent in the first half and 2.3 percent in the latter — slower than last year’s 3.4 percent pace.

In its previous forecast, the KDI expected inflation to come in at 2.5 percent.

The institute suggested that monetary policymakers focus on enhancing fiscal stability, considering rapidly changing demographics, and added that “current tightening needs to be gradually loosened in line with inflation reaching the target rate” of 2 percent.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]