KDI maintains forecast for Korea’s economic growth this year at 1.8%

Korea Development Institute (KDI) presenting on Thu. [Photo by Yonhap]

Korea Development Institute (KDI) Thursday forecast the country’s economy will grow 1.6 percent this year, maintaining its earlier estimate as it expects a recovery in the second half helped by China’s reopening.

South Korea has become dependent on China for its economic growth, with the neighboring country accounting for over a quarter of its total trade.

In its revised economic outlook, the state think tank forecast the economy will grow 1.1 percent in the first half, lower than its earlier 1.4 percent estimate, and 2.4 percent in the second half, higher than its earlier 2.1 percent projection.

The main rational for such prediction is China’s reopening. Although the Chinese economy is likely to be in a contraction phase in the first half of the year, exports to the country are expected to improve as the Chinese economy rebounds in the second half.

When the Chinese economy improves, inflationary pressure may increase slightly, and interest rates may tighten more than expected, but the biggest focus is China’s economic recovery, which will have a positive affect the Korean economy, said Jung Kyu-chul, a senior economist at KDI.

KDI’s forecast is higher than that of the Korean government’s latest forecast of 1.6 percent growth, Bank of Korea’s 1.7 percent and the International Monetary Fund’s 1.7 percent and the same as that of the Organisation for Economic Co-operation and Development.

KDI plans to reveal revised economic forecasts for this year in May, August and November.