S. Korea raises 2024 economic growth outlook to 2.6 pct

By Oh Seok-min

SEOUL, July 3 (Yonhap) -- The South Korean government raised its forecast for economic growth in 2024 to 2.6 percent Wednesday, citing solid exports and a global economic recovery.

The latest projection marks a 0.4 percentage-point increase from its previous outlook presented in January.

"The recovery in exports is expected to be strong through the second half on the back of the gradual growth of the global economy and the brisk semiconductor industry," the Ministry of Economy and Finance said in a report on its economic policy direction.

The economy has been on a recovery track since late last year following a downturn amid the COVID-19 pandemic and the global economic slowdown.

The government's latest projection is on par with the projection by the Organization for Economic Cooperation and Development and the Korea Development Institute.

The Bank of Korea presented a 2.5 percent expansion, and the International Monetary Fund forecast 2.3 percent growth.

In the first quarter of 2024, the country logged a 1.3 percent on-year expansion, the highest level in more than two years.

Exports, a key growth engine, extended on-year gains to the ninth straight month in June, as chip exports surged 50.9 percent to reach an all-time monthly high of $13.4 billion, according to government data.

The government expected exports to rise 9 percent this year, rebounding from a 7.5 percent decline in 2023.

Domestic demand is also expected to show signs of improvement in the second half, given inflation projections and corporate performances, though the pace of the recovery would vary widely among sectors, according to the ministry.

"Households' interest burdens remained high, but consumer prices are expected to ease further, and companies will report better results to help boost households' real income," the report read.

"Facility investment would likely recover in line with rising exports, but the construction sector would continue to experience difficulties over real estate project financing risks and the expected fall in new projects," it said.

Inflation is forecast to come to 2.6 percent for 2024, slowing from the previous year's 3.6 percent, and it will ease further to 2.1 percent in 2025, according to the ministry.

In June, consumer prices, a key gauge of inflation, rose 2.4 percent on-year, the lowest in 11 months.

The government has said that the country is projected to reach the target rate of 2 percent by around the end of this year.

As for the job market, the finance ministry estimated the number of the employed to rise by 230,000 on-year this year, and the employment rate among people aged 15 and above will stand at 62.8 percent.

The ministry expected the economy to grow 2.2 percent in 2025 and consumer prices to rise 2.1 percent.

Policy priority in the second half will be on ensuring stable prices and better supporting small merchants and ordinary people, according to the ministry.

A total of 5.6 trillion won (US$4.4 billion) will be extended for curbing inflation and reducing the living expenses of the people.

Detailed measures include reducing import tariffs, boosting the government's reserves of major agricultural products and providing discounts on food items for low-income households.

The government pledged to minimize the increase in public utility fees and extend tax incentives for savings dedicated to housing subscriptions.

For the self-employed and other small merchants, the government will push to ease rules on taking out loans and repayment and to reduce loan interest rates, as well as regulations on their hiring of foreign workers.

It will create a new program designed to help their business growth and offer consulting and other services to encourage their advance overseas.

Greater subsidies will be set aside to reduce small merchants' financial burdens of paying rent, electricity bills and delivery charges, and the fund for those who want to close their businesses and launch new ones will be raised from 30 trillion won to more than 40 trillion won, according to the ministry.

[email protected]
(END)