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Consumption to fuel Korea’s growth: AMRO

‘Ukraine war, global supply shortage and US rate hike could restrict 2022 GDP growth’

An image of the ASEAN+3 (Ministry of Trade, Industry and Energy of Korea)
An image of the ASEAN+3 (Ministry of Trade, Industry and Energy of Korea)
SEJONG -- The ASEAN+3 Macroeconomic Research Office has predicted that South Korea would attain a 3 percent growth this year on the back of robust consumption among households.

In its outlook report on the 13 Asian economies on Tuesday, AMRO maintained its earlier forecast of a 3 percent growth for Korea, which was the figure suggested by the organization in January.

The figure was in line with estimates suggested by the International Monetary Fund and the Asian Development Bank. The Ministry of Economy and Finance of Korea set the growth target at 3.1 percent this year.

The organization forecast that the nation would see an increase in private consumption in 2022, propelling the growth of gross domestic product.

But it suggested a longer-than-expected Ukraine-Russia war as a main downside risk for the Korean economy.

AMRO stressed that a dragged out war in Ukraine could bring about a surge in raw materials prices and food prices and could hamper the growth of the overall region of ASEAN+3, most of which are importers of energy including international crude.

In light of the geopolitical ramifications, the organization has revised its outlook on consumer price growth in Korea upward to 2.9 percent, from its earlier forecast of 2.1 percent.

The nation also faces downside risks of US monetary tightening at a faster-than-expected pace, possible emergence of a new variant of COVID-19 and global supply shortage of raw materials and products. The report also addressed financial risks from reduced income of businesses and households.

Local market insiders warn that another hike in the benchmark interest rate by the Bank of Korea could aggravate the loan rate burden on households, as a large portion of them are saddled with mortgage debt.

Over the past few years, the all-time high household debt in Korea has been a core factor restricting private consumption.

AMRO expected that the economy of ASEAN+3 would expand 4.7 percent in 2022.

It predicted a 5.2 percent GDP growth for China, 2.9 percent for Japan, 5.2 percent for Indonesia, 6 percent for Malaysia, 4 percent for Singapore and 3.4 percent for Thailand.

AMRO also said Korea is projected to post a 2.6 percent growth in 2023, with consumer prices rising 1.9 percent.

AMRO, established in 2011, is an organization aimed at promoting macroeconomic and financial stability in the East and Southeast Asian region.

By Kim Yon-se (kys@heraldcorp.com)
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