The government on the 14th said in its "second-half economic growth strategy" that it will raise this year's "nominal growth rate" outlook to 12.3% from 4.9%. This marks a shift from January, when it had released only the "real growth rate" outlook.
A senior government official said that it will "manage the nominal growth rate in tandem with the real growth rate." The policy of "managing real and nominal growth rates in parallel" is the first in 10 years since 2016.
The nominal growth rate differs from the real growth rate in that it includes price increases. Experts say, "In an era of high inflation, if the government focuses on the nominal growth rate, the gap with what people feel in the economy could widen."
◇ Nominal growth outlook 4.9%→12.3%… "Export prices have a bigger impact than consumer prices"
The nominal growth rate reflects the GDP deflator, an indicator that shows the overall price level of the economy, including exports and imports and domestic demand, on top of the real growth rate. The nominal growth rate has been on an upward trend recently. The government said, "Export prices have risen more than consumer prices." In fact, in the first quarter, the domestic demand deflator rose 2.1%, and the export deflator rose 23.5%.
On the day, the Ministry of Finance and Economy released the "2026 revised outlook and 2027 economic outlook." It raised this year's real growth outlook to 3% from 2%, and the nominal growth outlook to 12.3% from 4.9%. The outlook says that when the real growth rate rises by 1 percentage point, the nominal growth rate will rise by 7.4 percentage points.
This suggests the government has put forward a policy of "managing real and nominal growth rates in parallel." Generally, the government has released outlooks centered on the real growth rate and pursued economic policy accordingly. A policy like this "parallel management of real and nominal growth rates" is an unusual move that has appeared for the first time in 10 years since 2016.
◇ "Even if exports increase and the nominal growth rate rises, high prices would burden the economy"
In its 2016 economic policy direction, the government said it would "shift macro policy from managing the real growth rate to managing the real and nominal growth rates in parallel." At the time, the real growth outlook was 3.1%, and the nominal growth outlook was 4.5%. In the end, the real growth rate came in at 2.9%, and the nominal growth rate at 4.7%.
Around that time, concerns were mounting over a "breakdown of 3% growth" and "deflation (a long-term decline in prices amid an economic slump)." The real growth rate, which was 7% in 2010, fell to 2.9% in 2015. Also, the annual consumer price inflation in 2016 was 1%, below the Bank of Korea's price stability target of 2%. Policymakers had to set goals to prevent the economy from shrinking further. In that context, the focus was placed on the nominal growth rate, which reflects price increases.
Today's economic situation is the exact opposite of 2016. With a surge in semiconductor demand, export volumes are increasing and prices are rising, pointing to high growth and high inflation. In this situation, why did the government present a policy of "managing real and nominal growth rates in parallel"?
A Finance Ministry official said, "We aim to supplement so that people can feel the improvement in macroeconomic indicators through a rise in the nominal growth rate by supporting vulnerable groups and with structural reform policies." Nominal GDP is used to calculate the government debt ratio and per capita gross national income (GNI). If nominal GDP grows sharply, these indicators improve.
Experts, however, say the government should "center its policy on the real growth rate, not the nominal growth rate." Kim Miru, head of the Macroeconomic and Financial Policy Department and director of economic forecasting at the Korea Development Institute (KDI), said, "If consumer prices rise significantly, the effect of improved terms of trade from strong exports could diminish." Kim added, "Provided that the consumer price inflation is well managed within the 2% price stability target, a rise in export prices could have a positive effect across the economy."