[그래픽뉴스] The Korean economy, this year’s economic growth rate of 2.4% … An economic recession will start next year

[산업일보]
A red light is on for Korea’s economic growth in 2023. Opinions are emerging that if the government fails to adequately respond to the high gear in exchange rates, prices and interest rates, it could enter a recession.

The report entitled “KERI Economic Trends and Prospects: 2022-2023”, recently released by the Korea Economic Research Institute, shows that domestic demand is recovering in the second half of this year due to the intensification of the 3-high phenomenon (prices , high exchange rates and high interest rates) as a result of the protracted Russia-US. The economic growth rate is expected to register 2.4% as exports continue to weaken and slow down.

Moreover, in 2023, a growth rate of 1.9% is expected due to the growing global economic slowdown and a lack of domestic growth momentum. The Korea Economic Research Institute has predicted that a gradual response to a rapid rise in interest rates will be a key variable determining next year’s growth trend.

In particular, it has been analyzed that the continued tightening policy of the US Federal Reserve and the amplification of financial market uncertainty due to excessive private debt could further reduce the rate of economic growth.

The report forecast that the growth rate of private consumption, which accounts for the largest share of domestic consumption, would slow from 3.8% in 2022 to 2.5% in 2023. A decline in real purchasing power due to high prices and a contraction in consumer confidence due to the economic recession are driving the trend of slowing consumption, while a decrease in the income of the self-employed and the principal and interest repayment burden on household debt, which has skyrocketed due to of the increase in interest rates, should hinder the recovery of consumption.

Investments in instruments are expected to post a low growth rate of 1.0% due to growing uncertainty due to the global economic downturn and the burden of raising capital due to interest rate hikes.

KERI predicted that real exports, which up to that point had been driving economic growth, would grow by 1.2% due to the combined effects of the worsening global economic recession and sluggish exports of semiconductors, the main item of export.

In particular, if the size of the economic contraction in China, the main exporter, is higher than expected or if the performance of the main export items other than semiconductors does not meet expectations, the possibility of a further weakening of the export growth.