Investment banks lower Korea's growth forecast to 1.7% amid political chaos

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Investment banks lower Korea's growth forecast to 1.7% amid political chaos

Published: 07 Jan. 2025, 16:54

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

A street in Myeong-dong, central Seoul, appears largely empty on Dec. 23. [NEWS1]

Major global investment banks expect the Korean economy to grow 1.7 percent this year as the country grapples with weak consumer confidence and uncertainty ahead of President-elect Donald Trump’s inauguration.

According to a report from the Korea Center for International Finance (KCIF) on Tuesday, the average growth projection for Korea this year by eight investment banks declined by 0.1 percentage points from a month earlier to 1.7 percent in December.

The projection presents a more pessimistic outlook than the Ministry of Economy and Finance’s 1.8 percent and the Bank of Korea’s 1.9 percent.

Out of the eight market forecasters, JP Morgan lowered its projection by the steepest margin, from 1.7 percent in November to 1.3 percent in December.

JP Morgan, according to the KCIF, attributed the latest adjustment mainly to an aggravation of already weak domestic demand triggered by the martial law declaration on Dec. 3 and the political turmoil that ensued.

Korea’s Composite Consumer Sentiment Index fell 12.3 points from a month prior to 88.4 in December, the lowest since November 2022, according to data from the Bank of Korea on Dec. 24. The drop was the steepest since the index fell by 18.3 points in March 2020 due to the Covid-19 outbreak.

HSBC also knocked down its projection from 1.9 percent to 1.7 percent. Other investment banks kept their forecasts unchanged within the 1.6 to 1.9 percent range.

The investment banks expected the Korean economy to see growth below the 2 percent mark next year as well, with an average rate of 1.8 percent.

Meanwhile, JP Morgan also inched up its inflation forecast for Korea this year from the previous 1.7 percent to 2 percent, and HSBC from 1.9 percent to 2 percent. Citi lowered its projection from 2 percent to 1.9 percent.

Korea’s headline inflation came at 1.9 percent in December, an acceleration from the previous month’s 1.5 percent. The central bank expected the current high won-dollar exchange rate might further stimulate inflation this year.

BY SHIN HA-NEE [[email protected]]