21st National Assembly and Economic Outlook of Korea
Published on June 26, 2020
Published by Macro-Economic Analysis Division, Economic Analysis Department
The purpose of this report is to examine the global economic conditions facing the Korean economy and its future direction during sessions of the newly opened 21st National Assembly. During the 21st National Assembly, the global economy is expected to experience unpredictable circumstances littered with tumultuous changes. And the reasons for this include: elevated uncertainties stemming from the COVID-19 pandemic, the US-China trade conflict, increasing debt in major countries, international oil price fluctuations, Brexit, etc., and an accelerated 4th Industrial Revolution due to changes in the way economic agents act. Furthermore, there might be other elements in the global economy that may work against the Korean economy, including low growth and low price trend, the proliferation of protectionist trade, the loosening of the global value chain, and the strengthening of global environment regulations.
Under these uncertain and unfavorable circumstances, the real GDP growth rate of Korea during the period of 2020-2024 is expected to drop by 0.8%p from the previous five years (2015-2019: 2.8%) to 2.0% per annum. By area of expenditure, private consumption (annual average of 1.8%) is expected to fall below the real GDP growth rate during the period of 2020-2024, and construction investment and total exports are expected to record a slower growth. In particular, the real GDP growth rate in 2020 is estimated to be around 0% for the year, reflecting the pandemic-induced shock.
Nominal GDP is expected to grow at an average annual rate of 3.1%, which is lower than the previous five years (4.2%), with both real GDP and GDP deflator growth rates going down. The decline in the economic growth rate is expected to lead to a drop of 0.5%p from that of the previous 5 years (2015~2019), putting the nation’s potential annual average growth rate at roughly 2.3%.
As mentioned, the Korean economy has many hardships to overcome in the months ahead: uncertainties in the global economy, falling economic growth rates, unfavorable external export conditions, financial instability, and more stringent environmental regulations. Nevertheless, once economic subjects in the nation try to address these issues more proactively, they will give rise to economic innovation and a new-found growth engine that will help catapult the Korean economy forward once again. Efforts made by individual households, businesses and the government, along with the cooperation and support from the 21st National Assembly, will be critical in turning this goal into a reality.