Korean Economy Growth Forecast Rises to 2.4%: Analysis on Security Companies and Construction Investment

The average of domestic security companies was revised to 2.4%. and construction investment.”

As the Korean economy breaks away from ‘0% seasonal growth’ for the first time in two years, the government is raising its forecast for Korea’s economic growth rate this year. Domestic security firms, which expected the Korean economy to grow only in the low 2% range this year, raised their growth forecasts to the mid 2% range. However, some say that it is not yet clear whether the recovery in domestic demand that led to a remarkable rebound in growth rate in the first quarter (January to March) can be sustained.

On the 28th, the Ministry of Strategy and Finance said, “Considering the strong performance in the first quarter, it is possible that this year’s growth rate will be higher than the government’s forecast,” and said e, “The specific forecast is based on extensive consideration. future changes in conditions, etc. and economic policy guidance for the second half of the year (July to December).” Inside and outside the government, an upward adjustment of the growth rate is being considered which is predicted in economic policy guidance for the second half of the year, which is usually announced at the end of June.

Previously, in January this year, the government presented the forecast of the Korean economic growth rate for 2024 as 2.2%. At that time, it was known that the Ministry of Strategy and Finance had released a growth forecast, predicting that the quarterly growth rate would be 0.5-0.6%. However, Korea’s economic growth rate for the first quarter of this year, announced on the 25th, was 1.3%, significantly higher than the government’s forecast. This is the first time since the fourth quarter of 2021 (1.4%) that the quarterly growth rate has exceeded the 0% range. Even if the growth rate in the second quarter of this year (April to June) is only 0% and the third quarter (July to September) and the fourth quarter (October to December) show only 0.5% each, mathematically, the third quarter (July to September) is only 0.5% per year. The growth rate is 2.6%. Domestic security firms have raised their forecasts for Korea’s economic growth rate this year. Immediately after the announcement of the growth rate of the first quarter, the research centers of 10 domestic securities companies (Korea Investment, SK, KB, Hana, Meritz, Eugene Investment, Sangsangin, Samsung, Hi Investment, and Shinhan Investment) reviewed economic growth Korean. rate this year to an average of 2.4%. It was 0.3 percentage points higher than the average forecast of 2.1% just before the growth rate was announced. According to the Center for International Finance, the median forecast of global investment banks (IBs) was also increased by 0.5 percentage points from 2.0% to 2.5%.

However, some say it remains to be seen whether the recovery in construction spending and investment, which led to a surprising rebound in growth in the first quarter, will continue. Ha Jun-kyung, a professor of economics at Hanyang University, said, “We achieved surprisingly good results due to the fundamental effect, but it is difficult to say that Korea’s growth path has changed because there is still great uncertainty in external conditions and domestic demand, an optimistic view is premature. ” Construction investment increased by 2.7% in the first quarter, but showed negative growth (-4.5%) in the fourth quarter last year. Private consumption, which rose by 0.8%, also rose by just 0.2% in the fourth quarter of last year. The contribution of domestic demand growth in the first quarter was 0.7 percentage points, higher than the contribution of net exports (0.6 percentage points) for the first time in a year since the first quarter of last year.

Cho Young-moo, a researcher at the LG Management Research Institute, said, “The rate of progress in fiscal performance compared to the government’s budget plan in January and February this year is faster than last year when the government spent a lot of money.” “The burden on the public as a result of high interest rates is expected to be higher than last year, so we need to keep a closer eye on the situation, including private consumption,” he said.

Sejong = Reporter Lee Ho number2@donga.com