At the end of last year, the US Federal Reserve forecast that the US economy would grow 4.0% this year. Other institutions, including the International Monetary Fund (IMF), have made similar estimates. Looking at this issue, I thought, “We and others are just looking at the perspective.” If a country that has grown at an annual average of 1.5% for over 20 years suddenly grows at 4.0%, there will be an obvious reason, but it is because it has not been found. Finally, after several downward revisions, the growth rate estimate is converging to 1%. And next year? There are many worries about next year’s economy. In addition to a severe economic downturn, there are prospects for crises of one kind or another in developed countries. In November, seven major domestic and foreign institutions, including the Bank of Korea, released their economic forecasts for next year. The expected average national growth rate is 1.9%. The prediction of the top nine foreign investment banks (IBs) was 1.1%. As for the US economy, international organizations such as the IMF have suggested a 1% growth rate and investment banks have suggested a 0.3% growth rate. However, if you look closely at the numbers, they don’t match. Many economists say Korea’s potential growth rate is 2%. This means that the growth rate that can be increased by maximizing internal resources is 2%. Our economic growth rate this year is expected to be in the lower 2% range, similar to the potential growth rate. In this situation, if growth is early 1% next year, I think it’s a major economic downturn. In a situation where the potential growth rate is 2%, growth of just over 1% is due to the slight slowdown in the economy and is hard to see as a major recession. The situation in the United States is similar. Even if growth is around 0% next year, it won’t be much different from the average growth rate of 1.5% over the past 20 years. Inaccurate economic forecasts have plagued the stock market this year. That’s because every time a new economic outlook was significantly revised down, fears of an economic downturn grew commensurately. In the second half of the year, the level was particularly severe and played a role in driving down stock prices along with interest rate hikes. When words and numbers don’t match, it can affect the stock market in two ways. If next year’s economic forecasts are revised downwards as drastically as this year, stock prices will suffer. Because this year the same thing will happen. Conversely, if next year’s growth rate slows as much as expected, or falls even lower than expected, the stock market will no longer be concerned about an economic slowdown. This is because when the stock price fell sharply in September and October, it reflected the market’s expected growth forecast, as low enough, so there is no further decline. Economic variables have a greater impact on the stock market than any other. Therefore, when the economic outlook is skewed to one side, the stock market outlook is also skewed to one side. When the stock price falls, the outlook is generally pessimistic. As the share price has fallen this year, the outlook for next year is not good. However, with the possibility of a major recession and economic crisis brewing, we need to reconsider whether our economic forecasts are accurate. stock market columnist
