The Korea Development Institute (KDI), a state-run research institute, said on the 11th that it raised its forecast for Korea's economic growth next year to 1.8% from 1.6%. Another state-run think tank, Korea Institute for International Economic Policy (KIEP), lifted its forecast for global economic growth next year to 3.0% from 2.9%.
In its "second-half economic outlook" the same day, KDI also said, "Exports next year will slow as the negative impact of U.S. tariff hikes begins to spread in earnest, but private consumption will increase 1.6% year over year due to falling market interest rates and the government's expansionary fiscal policy."
KDI's growth forecast for next year is higher than the Bank of Korea's (1.6%) and the same level as the International Monetary Fund (IMF). It is lower than the Organization for Economic Cooperation and Development (OECD, 2.2%).
KDI had projected 1.6% growth for next year in its outlook in Aug. Explaining the upward revision after three months, Jeong Gyu-cheol, head of KDI's Macroeconomic and Financial Policy Research Department, said, "The global semiconductor cycle has turned out better than we expected three months ago, and the government's expansionary budget acted as an upward factor."
KDI said facility investment will grow 2.0% next year after increasing 2.5% this year from a year earlier, as demand for semiconductor-related investment continues. It also projected construction investment, which fell 9.1% last year, will rise 2.2% this year. Exports increased 4.1% this year but are expected to grow only 1.3% next year.
KDI also raised this year's growth forecast to 0.9% from 0.8%. KDI said, "The slump in construction continues, but manufacturing and services are improving." It added, "As an economic recovery is expected, it is desirable to gradually adjust the government's expansionary policy stance."
Meanwhile, KIEP projected the global economy will grow around 3% next year. It revised up its May forecast of 2.9%. It also projected the global economy will grow 3.0% this year. KIEP said, "Corporations and countries are partially offsetting downward pressure on growth by mitigating economic shocks such as supply chain disruptions and geopolitical conflicts through various responses." It added, "The global economy will remain in a low-growth phase without a clear rebound."