AMRO Raises South Korea's Growth Forecast to 3.3%... Up by 0.2 Percentage Points in Three Months

The ASEAN+3 Macroeconomic Research Office (AMRO) has raised its forecast for South Korea's economic growth rate this year to 3.3%, just three months after its previous projection.

According to the revised regional economic outlook report from the Asian Development Bank (ADB) released on the 5th, the ADB also upgraded its economic growth forecast for South Korea this year by 0.2 percentage point to 3.3%, from the previous estimate of 3.1%. This marks a further upgrade just three months after the drastic upward revision from 1.1% to 3.1% that took place in April.

AMRO publishes a regional economic outlook report every April, and subsequently issues revised projections each quarter (in January, July, and October) reflecting changes in the economic environment. This time, AMRO did not provide separate comments on individual countries, including South Korea, aside from updating the growth projections.

The latest AMRO projection is similar to those from the Bank of Korea (3.3%) and the Korea Development Institute (KDI, 3.2%), but remains lower than the Organization for Economic Cooperation and Development's (OECD) estimate of 3.7%.

As for inflation, AMRO raised its forecast for this year from 2.6% to 2.7%, while lowering next year's projection from 2.4% to 2.3%.

Yonhap News Agency

AMRO expects the ASEAN+3 region to post annual growth of 4.1% in both this year and next year. It anticipates that the decline in domestic demand caused by rising energy prices will be partly offset by strong export and investment demand related to artificial intelligence (AI).

For inflation, AMRO forecasts that core inflation will remain relatively stable, but increases in global energy and food prices will be reflected with a time lag, resulting in projections of 1.6% for this year and 1.7% for next year.

However, AMRO assessed that downside risks are likely to dominate the region's economic outlook going forward. AMRO pointed out that, should demand related to AI weaken, regional exports and investment could contract. Additionally, ongoing conflict in the Middle East could drive up energy, transportation, and production costs, while abnormal climate phenomena such as El Nino may also lead to higher food prices.

AMRO also mentioned other risk factors, including the potential for a correction in equity markets led by strong technology stocks, rising government bond yields in major economies, sudden shifts in expectations regarding U.S. monetary policy, increased trade costs and disruptions in regional supply chains due to additional protectionist measures.

Meanwhile, AMRO identified structural risks that could impact the regional economy over the long term, including geopolitical fragmentation, population aging, and climate change.

This content was produced with the assistance of AI translation services.