Modest recovery set to pick up through 2013
Our GDP growth forecast for 2013 is now 2.2%. This down from the 3.3% we predicted in the last forecast. The recovery in exports is still patchy and the domestic economy remains subdued.
However, we continue to expect more robust growth during the remainder of the year and into 2014. Regional and global recoveries should gain momentum and encourage firms and households to raise their spending after a period of caution. Moreover, relaxed monetary and fiscal policies are likely to support the economy.
After two years of sub-trend 2%-3% growth, Korea is expected to expand annually by over 4% during 2014-16. This reflects the forecast improvement in the wider global economy, Korea’s strong trading links with China, and its exporters’ wide range of products and penetration of key markets.
However, the forecasts for 2014-16 are also more cautious than before, reflecting concerns about the lack of vigor in the domestic economy in recent years. And the actual outturns could still disappoint if consumers focus on reducing high debt levels or ultra-loose monetary policy in the advanced economies leads to a significant appreciation in the South Korean Won.
Contributions to GDP growth
Source: Oxford Economics
GDP and industrial production
Source: Oxford Economics
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