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| Containers for export are stacked at a pier in Korea's largest port city of Busan, May 10. Yonhap |
The Korea Development Institute (KDI) on Thursday slashed its growth outlook for the Korean economy this year to 1.5 percent, citing slowing exports of chips.
The latest estimate is down 0.3 percentage point from a 1.8 percent growth outlook suggested by the state-run think tank in February. The updated figure hovers below a 1.6 percent rise suggested by the Bank of Korea.
The International Monetary Fund expects Korea's annual growth for this year to be at 1.7 percent, with the Organization for Economic Cooperation and Development and the Asian Development Bank suggesting a 1.6 percent and 1.5 percent increase, respectively.
Asia's No. 4 economy is estimated to grow 0.9 percent on-year in the January-June period and expand at a faster pace of 2.1 percent in the second half, the KDI added.
The weaker outlook came amid the prolonged slump in the country's chip exports. Outbound shipments of semiconductors came to $6.3 billion in April, down 41 percent on-year, separate data from the trade ministry showed earlier.
The country's chip exports have logged an on-year decline since August last year.
The KDI, however, attributed the better outlook for the second half to the impact of China's economic recovery, coupled with a potential rebound in the demand for chips.
"On the back of improved exports following the recovery in demands from home and abroad, (the economy) will grow 2.3 percent on-year in 2024," the think tank added.
The KDI, however, warned the Korean economy's recovery will be delayed if the global demand for chips is not visualized in the second half.
"If the Chinese economy only recovers in the service sector without any impact in the investment sector, then its positive effect on Korea will also be limited," the KDI said.
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| An electronic signboard in the dealing room of Hana Bank in Seoul shows the benchmark Korea Composite Stock Price Index, May 10. Yonhap |
An official from the institute noted the growth may fall below 1.5 percent, depending on the recovery of the chip market.
The think tank added other uncertainties for the Korean economy also linger, noting global prices of grains and energy could also experience a sharp rise if the situation in Ukraine deteriorates.
The assessment came as prolonged inflation could also induce central banks to keep borrowing costs high, weighing down on business activities.
"The growth (of Korea) can further slow if there is market instability after major countries continue to maintain high interest rates," the KDI said.
As for domestic consumption, the think tank said the growing demand for travel services is offsetting negative impacts from inflation and high interest rates, but the growth will slow in 2024.
"After rising 3 percent on-year in 2023 on a gradual recovery in the demand for travel services, the growth is estimated to reach 2.5 percent in 2024, hovering above the economic growth," the KDI said.
The KDI estimated Korea's annual inflation at 3.4 percent, which is down 0.1 percentage point from the previous estimate.
The country's facility investment is expected to grow 1.1 percent and 1.8 percent, respectively, in 2023 and 2024, the think tank added. (Yonhap)
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