Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Asian Development Bank keeps Korea's 2021 GDP growth forecast at 4 percent
Finance Minister Hong Nam-ki, left, shakes hands with Asian Development Bank Managing Director General Um Woo-chong, at the Government Complex Seoul, Oct. 25. Yonhap
By Lee Min-hyung
By Lee Min-hyung
The Asian Development Bank (ADB) kept Korea's 2021 GDP growth forecast unchanged at 4 percent on the country's solid growth in exports and equipment investment, the ADB said Tuesday.
The bank also maintained the nation's GDP growth outlook for 2022 at 3.1 percent, as the Korean economy is expected to continue its robust recovery driven by export growth and private consumption, the bank said in a report titled “Asian Development Outlook 2021 Supplement.”
“(Korea's) GDP forecasts are retained at 4 percent for 2021 and 3.1 percent for 2022,” it said. “Private consumption is expected to recover in the fourth quarter, which has seen the easing of social distancing measures and the vaccination rate surpass 70 percent.”
ADB's forecast on the economy this year is identical with that of the Bank of Korea (BOK). BOK Governor Lee Ju-yeol also expected the economy to keep bouncing back on its strong recovery in domestic consumption, despite reviving fears of a new wave of COVID-19 spreading here.
Despite the ADB's quite rosy outlook, it also cited the possibility of China's economic slowdown, prolonged global supply bottlenecks and the U.S. Fed's normalization of its monetary policy as major risk factors that may widen volatility in the financial market here and abroad.
The analysis came at a time when the Fed is sending repeated signals of speeding up the timeline to end its years-long tapering. A prevalent outlook is that the Fed will start raising its near-zero key rate as early as May 2022, and then once or twice more before the end of the year.
The BOK already increased its benchmark rate twice, and is scheduled to raise it by 25 basis points sometime in January and February, as part of a preemptive move to bring growing inflationary pressures under control.
The regional development bank also raised its forecast on Korea's inflation by 0.3 percentage points for 2021 and 2022, respectively.
“For Korea, by contrast, inflation forecasts are revised up, to 2.3 percent in 2021 and 1.9 percent in 2022, reflecting stronger demand and rising oil prices,” it said. “Consumer price inflation has exceeded the BOK's 2.0-percent target every month since April 2021 because of accelerating increases for petroleum products and for services, averaging 2.2 percent from January to October.”
The ADB also underscored that the economy is still exposed to possible risks from the pandemic amid the outbreak of the Omicron variant and the weakened effects of vaccines.