The South Korean economy is expected to gradually show signs of recovery thanks to domestic demand and improved exports. While a growth rate in the 0% range is predicted for this year, analyses suggest that a growth rate in the mid-to-late 1% range is likely for next year, and in the early 2% range for the year after. In particular, the growth rate for the third quarter of this year is also expected to be among the highest among major countries.
According to figures compiled by Bloomberg on the 31st, the average forecast for South Korea's real gross domestic product (GDP) for next year, presented by 41 domestic and foreign institutions, was 1.8%.
This is 0.2 percentage points higher than the 1.6% projected by the Bank of Korea on the 28th in its revised economic outlook and is in line with the government forecast.
Goldman Sachs (2.2%), JP Morgan (2.1%), and Standard Chartered and BNP Paribas (each 2.0%) among eight institutions projected growth in the 2% range. Nomura Securities, Allianz, Deutsche Bank, S&P, and Société Générale projected an average of 1.9%.
On the other hand, some institutions, including Morgan Stanley (1.5%), Capital Economics (1.4%), and Fitch (0.9%), provided relatively conservative forecasts; however, 35 out of the 41 institutions had projections that matched or exceeded the Bank of Korea's outlook (1.6%).
The forecast for the year after next is even more optimistic. So far, the average from 19 institutions has been 2.0%, which includes UBS (2.9%), Société Générale and Bank of America Merrill Lynch (2.1%), and S&P and Fitch (1.9%). This figure exceeds the 1.9% potential growth rate for South Korea estimated by the Organisation for Economic Co-operation and Development (OECD) in June.
Bank of Korea Governor Lee Chang-yong noted at a press conference on the 28th, "I view that the potential growth rate has fallen below 2%, and I believe we will see growth close to potential in the second half of next year."
Looking at quarterly trends, the signs of recovery are even clearer. South Korea's growth rate was -0.2% in the first quarter, ranking 31st among 37 major countries, but it jumped to 0.6% in the second quarter, reaching 10th place.
The Bank of Korea predicts that the growth rate for the third quarter will rise to 1.1% due to the recovery in private consumption and robust semiconductor exports. If the forecast holds, it is highly likely that the third-quarter ranking will enter at least the top five.
However, the possibility of reduced exports due to tariff increases from the United States is identified as a burden for both this year and next year. The tariff rate agreed upon in the South Korea-U.S. summit could change during the practical negotiation process, and negotiations between the U.S. and China are still uncertain.
Domestically, the trend in the construction market is a significant variable. Governor Lee Chang-yong said, "Construction investment is expected to decline by 8.3% this year, and just changing this figure to 0% would raise the growth rate to 2.1%, indicating the significant impact of the construction market."