South Korea’s think tank warns of steeper economic slowdown in H1

SEOUL  – The rising cost of living is likely to hurt South Korea’s economy much more significantly in the first half of this year than previously thought, its top government research agency said on Thursday.

The Korea Development Institute (KDI) cut its economic growth forecast for the January-June period to 1.1 percent in annual terms from 1.4 percent seen in November, mainly due to slowing private consumption. That is less than half the five-year average of 2.3 percent growth for the comparable period.

Still, it kept the 1.8 percent growth forecast for the entire 2023, citing an accelerating recovery in the Chinese economy as the driving factor, although acknowledging huge uncertainty over the economic prospects in the giant neighbour.

South Korea’s economy, Asia’s fourth-largest, slipped into its first contraction in 2-1/2 years in the final quarter of 2022 due to a crash in exports.

The central bank has said growth in all of 2023 would slow to 1.7 percent from an estimated 2.6 percent gain in 2022.