Brighter growth outlook for S. Korean economy expected this year

 The South Korean economy is forecast to grow at a faster pace than earlier expected this year on the back of robust exports and improving domestic demand following slumps caused by the pandemic.

President Moon Jae-in said in a special address to mark his fourth inauguration anniversary that the government will make efforts to prompt Asia’s fourth-largest economy to grow at least 4 percent this year.

His projection is far higher than the 3.2 percent growth estimate made by the finance ministry in December last year. The government recently penciled in the economic growth rate in the mid-to-high 3 percent range on improving data.

This file photo, taken March 2, 2021, shows ships carrying containers docked at a port in South Korea’s southeastern city of Busan. (Yonhap)

If the country is able to pull off the 4 percent growth rate this year, it would mark the fastest growth since 2010, when the Korean economy expanded 6.8 percent.

The government plans to unveil its revised official outlook in mid-June, but the brighter outlook presented by Moon reflects the government’s confidence for economic recovery momentum.

The Korean economy is on a recovery track on the back of solid overseas shipments of chips and autos and improving private consumption.

Asia’s fourth-largest economy grew 1.6 percent in the January-March period from three months earlier, accelerating from a 1.2 percent on-quarter gain in the fourth quarter of last year, according to the Bank of Korea (BOK).

The Korean economy contracted 1 percent last year amid the COVID-19 pandemic, the first yearly retreat since the 1997-98 Asian financial crisis. But it contracted by a far smaller margin than other major economies.

Exports, which account for half of the economy, jumped 41.1 percent on-year in April to extend their gains to the sixth consecutive month amid a global economic recovery.

Private spending grew 1.1 percent on-quarter in the first quarter, compared with a 1.5 percent on-quarter decline three months earlier. Retail sales, a measure of private spending, also rose at the fastest pace in nine months in March.

The country’s efforts to accelerate the COVID-19 vaccine rollout may help the country pull off a stronger recovery.

Some local think tanks and foreign investment banks already revised up their 2021 growth outlook for the Korean economy to near or above 4 percent.

The Korea Institute of Finance (KIF) forecast the Korean economy to grow 4.1 percent this year, up 1.2 percentage points from its previous estimate.

JP Morgan revised up its growth forecast for Korea to 4.6 percent from 4.1 percent.

The BOK expects the Korean economy to grow at a rate in the mid-3 percent range, faster than its February projection of 3 percent.

Despite the upbeat outlook, the economic recovery still remains uneven across sectors, with income gaps between haves and have-nots deepening, known as a K-shaped recovery.

The service sector, hard hit by the pandemic, is still suffering from prolonged business setbacks and job losses as people have refrained from visiting stores on concerns about virus infections.

The country reported the first job addition in 13 months in March, but job growth was mainly driven by state-backed job programs for senior citizens.