Korea Development Institute (KDI) raised this year's growth forecast to 3.2% from 2.5%, while sharply lowering the forecast for the increase in the number of employed people to 110,000 from 170,000. If this outlook materializes, it would be the worst situation since 2020, when the number of employed people fell by 218,000 due to the pandemic's aftermath.
On the 19th, KDI's growth forecast in its "revised economic outlook" matched the average forecast of 3.2% for Korea's economic growth by eight major global investment banks (IBs) compiled by the International Financial Center as of the end of last month. It is higher than the Korean government's 3% and the International Monetary Fund's (IMF) 2.6% and the Organization for Economic Cooperation and Development's (OECD) 2.6%. KDI also raised next year's growth forecast to 2.2% from 1.7%.
KDI projected that, thanks to a semiconductor boom, facility investment and exports will grow much more than initially expected. KDI forecast facility investment to increase 7.9% this year and 7.0% next year. This too is an upward revision of 4.6 percentage points each from the May outlook. KDI also said a trade surplus of about $360 billion is expected this year and next, and raised the surplus in the current account by $120 billion and $140 billion for this year and next, respectively.
However, KDI assessed that this improvement in macroeconomic indicators will not translate into favorable employment conditions. It accordingly lowered this year's forecast for the increase in the number of employed people to 110,000 from 170,000. That is 40,000 fewer than the government's forecast released last month (150,000). A KDI official said, "The positive impact of the semiconductor boom on employment is not significant." The official added, "Most corporations will hire based on their outlook for business conditions, and apart from semiconductors, they are not good."
Meanwhile, KDI pointed out that heavy reliance on semiconductors is a risk factor. KDI said, "If global AI investment demand weakens or intensified competition reduces domestic semiconductor corporations' global market share, growth could slow rapidly." It added, "Of the 0.7 percentage point increase in the growth forecast, most—about 0.6 percentage point—stems from the spillover effects of the semiconductor industry."
KDI also kept its existing forecast for consumer price inflation at 2.7% this year and 2.2% next year.