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The Korea Times

The Korea Times

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15. Park Chong-hoon

Navigating uncertainty: economic forecasts and global dynamics in 2024

It is already November, the time of year when market economists embark on the annual ritual of forecasting macroeconomic indexes for the following year - an exercise fraught with uncertainty, at best. Economic forecasts are based on several assumptions, which may or may not come to pass. Historically, the U.S. and Chinese economies, oil price dynamics, geopolitics and the foreign exchange market have been key external factors affecting Korea’s economy. Next year will be no exception, in our view, with added policy risks caused by the U.S. presidential election next year.

2023-11-23 16:34

Navigating financial forecasting: Who to trust?

In the world of finance, uncertainty is a constant companion. One issue that often vexes investors is which bank's forecasts they can rely on. It's a simple question, yet the answer can be anything but straightforward. Famous investor and Oaktree Capital co-founder Howard S. Marks has long questioned the value of economic forecasts. Moreover, the diversity of forecasts from various banks leaves investors in perpetual doubt about which of these predictions they can trust.

2023-09-19 16:30

BOK might be among first to cut, but will not rush

We recently revised our view on the Bank of Korea's (BOK) policy rate and now expect a cut of 25 basis points in the first quarter of 2024 instead of the fourth quarter of 2023. This change in view is in line with the central bank's more hawkish stance recently and we expect it to stay on hold until the end of this year. Just as the BOK was among the first central banks to increase rates in the current cycle, we expect it to be the first to lower the base rate, but it may choose to do so based on its own unique needs.

2023-07-24 16:30

Time to tone down the pessimism

South Korea's economy faces various challenges, such as rising inflation, falling real wages, a persistent trade deficit and a weakening real estate market, but the overriding concern for the market is Korea's declining exports to its key trading partner, China.

2023-05-15 17:01

Prepare for the worst, but no need for pessimism

South Korea's trade deficit has been a cause for concern for the past 12 months due to a decline in semiconductor exports and exports to China. A widening trade deficit could impact the Korean won and monetary policy, prompting the Bank of Korea (BOK) to hike the base rate further to stabilize the currency. Moreover, the trade deficit may negatively affect economic growth by reducing imports and decreasing investment and economic activity.

2023-03-13 16:40

Expect timely fiscal expansion

“Don't tell me what you value. Show me your budget - and I'll tell you what you value.” -Joe Biden The government budget represents the political philosophy of the current government. The annual budget decisions can often be driven more by political than economic considerations, with more emphasis on the distribution of funds than on supporting growth.

2023-01-10 16:50

Managing market expectations will be key

The Korean won continues to depreciate, showing no signs of improvement this year. Starting the year at the 1,190 level, the currency has reached the mid-1,400s to the dollar, down 17.2 percent year to date, largely due to a strengthening of the U.S. dollar. Furthermore, relative to emerging market countries such as India, Indonesia and Malaysia, the Korean won has declined the fastest this year since the 2008 global financial crisis (GFC).

2022-10-20 14:01

Wishful thinking amid both positives and risks

The KOSPI has shown some recovery since July, recouping some of the losses of this year. The index fell 22.2 percent up until June, one-year Korea Treasury Bond (KTB) yields rose to 3 percent on June 30 and have fallen since, suggesting that the policy rate is likely to peak around the 3-percent level. The market also no longer expects the Fed to hike the interest rate aggressively given the economic slowdown. Further, market expectations appear to be based on the expectation that U.S. inflation has already peaked.

2022-08-22 15:19

Face the facts but don't be overwhelmed by them

The “Stockdale paradox” is about conflicting duality: accepting the brutal facts of reality but maintaining an unwavering faith in the endgame. Jim Stockdale, a high-ranking U.S. navy officer, survived an eight-year imprisonment in Hanoi during the Vietnam War without giving up hope of freedom while facing the brutal fact that he would not be returning home any time soon, and definitely not for Christmas that year.

2022-07-11 16:32

Time to be conservative

I am often asked how the U.S. dollar-Korean won exchange rate will move in the near term, especially by acquaintances who have to send money to the U.S. for their kids. They are worried about the recent rapid pace of the won's depreciation and are feeling the pain of having to spend 10 to 15 percent more in Korean won terms to send their kids to school in the U.S. Corporates, especially importers, are facing similar pressure. Their profits can fluctuate by over 10 percent depending on the time of buying and selling dollars.

2022-05-09 16:55

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