An economist at S&P Global Ratings has estimated that South Korea’s economy will grow 1.4 percent this year, with the country’s central bank likely to reduce its key rate twice in 2024. This prediction by Rajiv Biswas, the chief economist of Asia-Pacific at S&P Global Market Intelligence, is in line with the South Korean government’s projection released in July.
Biswas attributed the sluggish economic growth in 2023 to the Bank of Korea’s aggressive monetary tightening policy from the previous year, which has caused several issues within the economy, particularly in the real estate sector.
The Bank of Korea has kept its key interest rate at 3.5 percent for the fifth consecutive month in August, as it weighs a decline in growth against moderating inflation. This follows seven consecutive rate hikes from April 2022 to January 2023.
Biswas also mentioned that the central bank is likely to cut its key rate in the first half of 2024 in accordance with the U.S. monetary policy.
Exports have also been adversely affected by the weaker global demand for semiconductors and display products, according to Biswas. Although the slowdown of the Chinese economy has had a negative impact on South Korea’s outbound shipments, the decrease is expected to be somewhat mitigated by the worldwide recovery in chip demand from other countries.
Biswas recommended that South Korea shift its focus to India and Southeast Asian countries as new trading partners in light of the deceleration of the Chinese economy.
Rajiv Biswas, the chief economist of Asia-Pacific at S&P Global Market Intelligence, speaks during an interview with Yonhap News Agency in Seoul on Sept. 15, 2023. (Yonhap)
colin@yna.co.kr
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