Asian Development Bank reduces South Korea’s economic growth forecast for 2023 to 1.3%


By Kang Yoon-seung

SEOUL, July 19 (Yonhap) — The Asian Development Bank (ADB) on Wednesday decreased its estimated growth rate for the South Korean economy in 2023 to 1.3%, citing weak exports and investments.

The downward revision came three months after the Manila-based organization projected a 1.5% growth rate for Asia’s fourth-biggest economy.

Earlier this month, the South Korean government also adjusted its 2023 growth forecast downwards by 0.2 percentage points to 1.4%. In June, the Organization for Economic Cooperation and Development (OECD) lowered its 2023 growth outlook for South Korea by 0.1 percentage points to 1.5%.

The revision was due to the country’s continued sluggish outbound shipments, despite some signs of recovery.

Last month, South Korea reported a trade surplus for the first time in 16 months, but its exports dropped for the ninth consecutive month due to a lack of demand for semiconductors.

Outbound shipments decreased 6% year-on-year to US$54.24 billion last month, which was the smallest year-on-year export decline so far this year, possibly indicating that exports may rebound in the second half of 2021.

The government earlier predicted that the country’s facility investment would shrink by 1.2% year-on-year due to the weak performance of the chip industry.

The ADB, however, maintained its growth forecast for 2024 at 2.2%.

As for inflation, the ADB predicted that consumer prices in South Korea would increase 3.5% year-on-year in 2023, up from the previous outlook of 3.2%, due to the continued upward trend in consumer prices despite indications of stability from the energy and food sectors.

Last week, South Korea’s central bank kept its key interest rate unchanged at 3.5%.

This was the fourth consecutive time that the BOK has held the rate steady following rate freezes in February, April and May. The rate freezes followed seven consecutive rate hikes from April 2022 to January 2023.

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