Korea Economic Forecast

Korea Economic Outlook

December 18, 2017

New data released by the Bank of Korea confirmed that economic performance was exceptional in Q3. Growth came in at 3.8% compared to the same quarter last year—the fastest pace in nearly four years and higher than the 2.7% growth recorded for Q2. Data for November suggests strong growth for Q4: Consumer confidence hit a seven-year high, with consumers particularly confident about domestic economic conditions, and growth in exports gathered pace. On 5 December, parliament approved the government’s budget for the 2018 fiscal year, which includes a 4.6% increase in spending compared to the previous year. It also approved increases in the maximum corporate tax rate and the upper personal income tax rate, raising concerns among some Korean businesses. Taken together, though, the parliament’s approvals should have an expansionary effect on the economy next year.

Korea Economic Growth

Higher government spending next year and improved diplomatic relations with China—which is expected to boost trade between the two countries—should pave the way for solid economic growth in 2018. However, government measures to tame increases in housing prices could weigh on the outlook. Our panelists expect economic growth of 2.9% in 2018, which is up 0.1 percentage points from last month’s forecast, and foresee an expansion of 2.8% in 2019.

Korea Economy Data

20122013201420152016
Population (million)50.050.250.451.051.2
GDP per capita (USD)24,54326,00426,81327,09627,535
GDP (USD bn)1,2271,3061,3521,3821,411
Economic Growth (GDP, annual variation in %)2.32.93.32.82.8
Consumption (annual variation in %)1.91.91.82.22.5
Investment (annual variation in %)-0.53.33.45.15.2
Industrial Production (annual variation in %)1.50.70.3-0.31.0
Retail Sales (annual variation in %)4.41.12.12.44.3
Unemployment Rate3.23.13.53.63.7
Fiscal Balance (% of GDP)1.31.00.60.01.0
Public Debt (% of GDP)32.133.835.937.838.6
Money (annual variation in %)4.84.68.18.27.1
Inflation Rate (CPI, annual variation in %, eop)1.41.10.81.11.3
Inflation Rate (CPI, annual variation in %)2.21.31.30.71.0
Inflation (PPI, annual variation in %)0.7-1.6-0.5-4.0-1.8
Policy Interest Rate (%)2.752.502.001.501.25
Stock Market (annual variation in %)9.40.7-4.82.43.3
Exchange Rate (vs USD, aop)1,1271,0951,0531,1321,160
Exchange Rate (vs USD)1,0711,0551,0991,1731,208
Current Account (% of GDP)4.16.26.07.77.0
Current Account Balance (USD bn)50.881.184.411698.7
Trade Balance (USD billion)28.344.047.290.389.2
Exports (USD billion)548560573527495
Imports (USD billion)520516526436116
Exports (annual variation in %)-1.32.12.3-8.0-5.9
Imports (annual variation in %)-0.9-0.81.9-16.9-6.9
International Reserves (USD)327346364368371
External Debt (% of GDP)33.332.431.428.727.0

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Korea Facts

ValueChangeDate
Bond Yield2.471.55 %Dec 06
Exchange Rate1,0940.21 %Dec 06
Stock Market2,474-0.11 %Dec 06

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