KDI keeps Korea's economic outlook at 1.5% for 2023

Korea's state-run think tank on Thursday maintained the country's economic growth outlook at 1.5 percent, unchanged from its estimate three months earlier.

Last month, the Korean government cut its growth forecast for this year by 0.2 percentage point to 1.4 percent. In June, the Organization for Economic Cooperation and Development lowered its 2023 growth outlook for Asia's No. 4 economy by 0.1 percentage point to 1.5 percent.

"Compared with the previous report, while the growth in consumption is expected to slow, the weak construction investment and commodity exports are anticipated to improve," the Korea Development Institute (KDI) said. It also maintained 2.3 percent growth for 2024.

The KDI said the Korean economy has recently been showing signs of a recovery led by the manufacturing sector, especially in the automobile and semiconductor industries.

"With the U.S. economy continuing its stable growth, exports in the second half are expected to maintain similar growth as projected earlier," it added, suggesting growth of 1.4 percent.

The KDI, however, said the recovery may further be delayed if China faces a further slump in its economy, or inflation remains elevated, inducing major countries to continue monetary tightening moves.

"If inflation expands due to higher crude and grain prices in the face of the war between Russia and Ukraine, along with the deteriorating weather conditions, major countries may bolster monetary tightening, led by the U.S.," the KDI said.

The KDI projected Korea's annual inflation for this year at 3.5 percent, slightly higher than a 3.4 percent outlook released in May, citing higher global crude prices. (Yonhap)