ADB cuts Korea’s 2023 growth outlook to 2.3%

Stacks of containers are waiting to be loaded at a port in Incheon. (Im Se-jun)

The Asian Development Bank lowered South Korea’s growth outlook for next year by 0.3 percentage point to 2.3 percent in its updated outlook published Wednesday, while keeping its forecast for this year at 2.6 percent.

It also maintained Korea’s inflation outlook at 4.5 percent for this year, and 3 percent for 2023.

“(Korea’s) private consumption is expected to slow in the second half of the 2022 as stimulus from the economy’s reopening fades and interest rate increases dampen consumer spending and limit business investment,” the ADB wrote in its latest report.

“Export growth is expected to weaken as well as growth in major export markets slows.”

The ADB also said that Korea’s monetary tightening in the first half of this year and going forward, along with lower global oil and food prices expected next year, should moderate price increases.

Korea’s export growth will slow further in the second half of 2022 as the global economy slows, lowering external demand, and this, combined with higher import prices for oil and other raw materials, will reduce the merchandise trade surplus, the ADB said.

“With the net service trade remaining in deficit, the current account surplus will be lower than Asian Development Outlook 2022 forecasts for both this year and next,” the Manila-based bank said.

As for the 46 developing nations in Asia including Korea and excluding Japan, Australia and New Zealand, the ADB revised down the growth forecasts to 4.3 percent for this year, and to 4.9 percent for next year.

Noting that inflation in developing Asia, while remaining lower than elsewhere in the world, is increasing amid higher energy and food prices, the ADB raised its regional inflation outlook to 4.5 percent for this year and 4 percent for next year.

The ADB also warned of severe downside risks, noting that “a sharp deceleration in global growth, stronger-than-expected monetary policy tightening in advanced economies, the Russian invasion of Ukraine escalating, a deeper-than-expected deceleration in China, and negative pandemic developments could all dent developing Asia’s growth.