Korea’s growth outlook downgraded to 3.4% from 3.7%

There are two main reasons for revising growth outlook for the Korean economy down by 0.3%p. First, global growth forecast was revised downward from 3.8% (in late 2014) to 3.5% (in January 2015). In addition, risks of exports to China have been widened due to several factors; the slowdown of the Chinese economy, China’s improved self-sufficiency rate of intermediate goods and curtailed competitiveness gap between China and Korea.

Consumer price growth revised down to 1.4% from 1.7%

The Tobacco price hike, the rise of USD/KRW and increase in prices of public utility services put upward pressure on consumer prices, whereas falling international oil prices and sluggish recovery in demand send the prices down further, implying that consumer price growth is forecast to drop slightly.

Current account surplus expected to reach a record US$110 billion; USD/KRW projected at 1,095 won for 2015

Despite a decline in export volume, current account surplus for 2015 is forecast to reach a record US$110 billion boosted by minus import growth led by a drop in unit price. USD/KRW is expected to show a gradual depreciation at a yearly average of 1,095 won, as the ascending pressure from strong-dollar is mitigated by a large current account surplus.

Enhancing the consumption propensity through improving domestic consumption conditions is very effective to boost domestic demand

One of a main reason for sluggish household income is weak business income of individual proprietor. An increase in tax and social security expenditure, expenditure for debt reduction also explains that consumption expenditure would hardly rise only by raising wages. When the income of lowest 20% income group, whose consumption scale is smaller, increases, the total consumption rises only by 1.02%; while the total consumption enhances by 2.63% if the propensity to consume of highest 20% income group climbs up 5%p. Thus, effective measures to boost domestic demand are increasing consumption propensity of upper - income group and turning overseas credit card usages to domestic, which all improve the domestic consumption conditions.

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