Economic Forecast for 2022 and the Medium-Term
Published on 30 September 2021
Published by Macro-Economic Analysis Division
In 2022, the Korean economic growth rate is expected to reach 3.0% as exports and plant and equipment investments continue to increase with strengthened recovery in private consumption. The rebounding trend of private consumption is expected to gain traction as it is boosted by increased COVID-19 vaccinations, new jobs and government policy support. Plant and equipment investments are likely to increase based on continued IT-related investments as well as increased investment demand for areas related to new growth and eco-friendly concepts. Intellectual property product investments are expected to maintain a positive increasing trend led by increased R&D investments in the private sector. Total export (volume) is expected to continue to increase in line with the global economic recovery trend, while total import (volume) is expected to exceed the export increase rate thanks to the traction provided by the recovery trend in domestic demand.
Over 2021-2025, a period which constitutes the medium-term forecasting time horizon, the real GDP growth rate is expected to reach an average of 2.8% per annum compared to the previous five years (2016-2020), as plant and equipment investments and exports spearhead economic growth. After exhibiting a rapid recovery from the COVID-19 shock between the period of 2021-2022, it is expected to rejoin the pre-COVID growth trajectory over 2023-2025.
Korea’s potential growth rate from 2021 to 2025 is estimated to reach an average of 2.3% per annum, labor’s contribution to potential growth - which was sluggish from the COVID-19 shock – will increase while the contribution of capital gradually declines amid the continuously falling trend of total factor productivity. In particular, once the COVID-19 crisis is over, the Korean economy - boosted by the gradual recovery of employment and increased solid investment - is expected to undergo a slowdown of the excessively declining potential growth rate, which has remained ongoing since the global financial crisis.