S. Korean economy forecast to grow 2.8% in 2022: KDI
Updated: 2022-05-19 08:03:03 KST
South Korea's state-run economic think tank expects the country's economy to see 2.8 percent growth this year.
The growth forecast that Korea Development Institute published on Wednesday is higher than that of the IMF's 2.5 percent.
It stated that private spending will rise in the coming months with the lifting of social distancing measures.
An official said South Korea's private spending is expected to show 3.7 percent growth in 2022.
"Private spending, which has been deeply suppressed due to the distancing measures, will rebound. We'll continue to see a gradual economic recovery led by the service sector."
He added that the Yoon administration's latest supplementary budget will also help raise economic growth by point-four percentage points, through boosting private spending.
However, the KDI's forecast is point-2 percentage points lower than its earlier projection made in
November last year, before the impact of Russia's invasion of Ukraine.
"We slashed the outlook from the one made in November because the country's private spending in the first quarter of this year has been worse than expected. Import prices rising due to high commodity prices and hikes in key interest rates both at home and in the U.S. have had a negative impact on economic growth."
Also, with high inflation likely to persist, the KDI says that adequate monetary policy, including raising the key rate is needed to stabilize soaring consumer prices.
The agency expects this year's inflation rate to be at 4.2 percent,a jump from the 1.7 forecast made last November.
KDI also says that export growth is likely to slow to 5.1 percent in 2022 from 9.9 percent last year, amid a fall in global demand, supply chain disruptions as well as high fuel and commodity prices.
With a slowdown in exports and increased external uncertainties, KDI forecasts the country's economic growth rate to drop to 2.3 percent in 2023.
Eum Ji-young, Arirang News.