ADB raises Korea's growth forecast to 2.5% on surging chip exports

Economy

Published: 17 Jul. 2024, 12:30 Updated: 17 Jul. 2024, 13:48

ADB raises Korea's growth forecast to 2.5% on surging chip exports

Containers are stacked at a port in the southeastern city of Busan on April 1. [NEWS1

The Asian Development Bank (ADB) raised its forecast for Korea's economic growth this year by 0.3 percentage points to 2.5 percent, citing soaring chip exports.

The growth projection for the Asia-Pacific region was also increased by 0.1 percentage point to 5 percent, mainly due to strong domestic demand and robust exports, particularly in electronics.

In its latest July 2024 Asian Development Outlook, published on Wednesday, the ADB projected that Korea’s real GDP would grow by 2.5 percent this year, revised from its previous prediction of 2.2 percent in April. The ADB cited strong export growth, driven by the semiconductor sector, for the upward revision.

Inflation is expected to come in at 2.5 percent this year, unchanged from the previous projection.

The bank’s growth forecast aligns with the International Monetary Fund’s revised projection of 2.5 percent, which was announced on Tuesday.

Korea’s Ministry of Economy and Finance revised its forecast for the country's economic growth this year from the previous 2.2 percent to 2.6 percent on July 3, citing robust exports driven by chip demand. The Bank of Korea also increased its projection in May from 2.1 percent to 2.5 percent.

For next year, the ADB retained its growth projection for the Asia-Pacific region at 4.9 percent.

Inflation in the Asia-Pacific region is expected to come in at 2.9 percent this year, down 0.3 percentage points from the previous forecast, due to continued monetary tightening and the slowing increase of food prices.

The ADB listed "policy uncertainty around election outcomes in major economies, mainly the U.S., geopolitical tensions, trade fragmentation, and PRC [People's Republic of China] property market fragility" as major risks, as well as weather-related events.

Update, July 17: Added details about inflation forecasts in the Asia-Pacific region and risk factors.

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