In its Economic Situation Assessment released on the 16th, the Bank of Korea (BOK) said the second-quarter real GDP growth rate will exceed the earlier forecast (0.2%). It also said this year's current account will achieve an unprecedented surplus on the back of strong semiconductor exports.
Helped by robust exports such as semiconductors, real gross domestic product (GDP) in the first quarter grew 1.7% from the previous quarter. It was the largest increase in 5 years and 6 months since the third quarter of 2020 (2.2%). The Bank of Korea (BOK), when it released its economic outlook in May, had expected the second-quarter growth rate to be 0.2%.
However, the Bank of Korea (BOK) said that day the second-quarter growth rate will be higher than expected. It said, "With the supply shock from the Middle East war largely cushioned by government policies such as the supplementary budget, and exports showing a favorable trend, growth is expected to exceed the earlier forecast (0.2%)." It added, "After the second half, as income conditions improve on the back of a strong semiconductor cycle and investment expands, including the three mega projects, the momentum for domestic demand recovery will strengthen, and the favorable growth trend is expected to continue."
It also said, "Next year, as the semiconductor upcycle continues and its impact spreads to other institutional sector s, both domestic demand and exports are expected to show a solid trend."
The Bank of Korea (BOK) also projected that this year's current account surplus will be at an "unprecedented level." Earlier, in its May economic outlook, the Bank of Korea (BOK) forecast an annual current account surplus of $250 billion. The bank said, "The goods balance is expected to post a large surplus due to a surge in exports of semiconductors and computer SSDs driven by the global expansion of artificial intelligence (AI) investment."
It added, "The services balance is expected to see a slightly narrower deficit than last year due to an increase in inbound foreign tourists and weaker demand for overseas travel by Koreans amid a strong won."
The Bank of Korea (BOK) projected consumer prices will remain elevated for the time being. The bank said they will stay high due to expanded demand pressures from an improving economy and the pass-through of expense shocks. It added, "There remain upside and downside risks to the inflation path ahead, including wider fluctuations in international oil prices, abnormal summer weather, and stronger government price-stabilization measures."