The Korean economy is expected to record an economic growth rate of 2.4% in 2024, higher than previously expected, owing to the strengthening growth of exports. Despite the increased domestic and international uncertainties and the diminished expectations of an early cut in the US Fed’s base rate, exports are projected to continue to have robust growth, especially in semiconductors as the global economy recovers. The higher-than-expected performance in the first quarter is the main reason for the upward revision of the growth rate forecast.

Private consumption, which accounts for the largest portion of domestic demand, is expected to grow by 1.9%, showing underwhelming performance. This is because the prolonged deterioration of the income base, coupled with the surge in household’s debt repayment burden, and the resulting weakening of consumer sentiment are constraining a full recovery. However, as the second half of the year progresses, private consumption is expected to recover further due to the gradual stabilization of prices, resulting in an increase in real income and the ripple effect of improved export performance.

Facilities investment is sluggish due to the continued uncertainty caused by the delayed global economic recovery and the added burden of capital financing because of the high interest rate. However, it is expected to gradually recover in the second half of the year as the global IT sector rebounds, recording a growth rate of 3.1%. Meanwhile, construction investment is expected to continue to be sluggish despite the increase in civil engineering investment. This is due to adverse factors such as the sharp decline in construction orders and permits last year and the deterioration of real estate project financing (PF).

The consumer price inflation rate (CPI) is expected to show a moderate downward trend maintaining a level of 2.7%. However, high volatility in raw material prices such as international oil prices and the upward trend in agricultural, livestock, and fisheries product prices will continue.

On the other hand, exports, which had been sluggish due to the global IT industry recession, the absence of a reopening effect in China, and greater geopolitical risks causing instability in raw materials supply and demand, are expected to gradually strengthen as major economies recover and the IT market expands. In particular, the growth rate of exports is expected to rise to 5.0%, driven by the increase in semiconductor exports owing to increased demand in AI-related fields.

The current account balance is forecast to recover to around $59 billion because of an increased trade surplus.

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