Summary
- ING said it cut its forecast for South Korea’s economic growth this year to 2.0%% from 2.2%%, citing raw-material supply disruptions caused by the war involving Iran.
- ING said the government’s 26.2 trillion won ($19.0 billion) supplementary budget would lift GDP by 0.2 percentage point and help the economy avoid a contraction in the second quarter.
- ING said a semiconductor boom and strong exports would support growth, but warned that prolonged supply disruptions could deepen the negative impact in the second half and add to upward pressure on prices.
Forecast Trend Report by Period
ING, the Dutch financial group, cut its forecast for South Korea’s economic growth this year to 2.0% from 2.2%, citing raw-material supply disruptions stemming from the war involving Iran that are weighing on manufacturing activity.
According to the financial industry on July 8, ING disclosed the revision in a July 1 report. ING wrote that supply disruptions triggered by Iran’s blockade of the Strait of Hormuz have weakened manufacturing activity and increased costs. It added that the effects could persist for a considerable period even if the war ends soon.
Still, ING said the government’s supplementary budget of 26.2 trillion won ($19.0 billion) would lift gross domestic product by 0.2 percentage point. If the extra budget clears the National Assembly, it would mainly contribute to second-quarter growth. ING forecast second-quarter growth would slow to 0.2% from the previous quarter but avoid contraction. It also said upward pressure on prices could build if higher energy costs persist.
ING said exports, supported by a semiconductor boom, will drive growth this year. Global investment demand remains firm for AI and memory chips, which should help sustain export momentum. South Korea’s exports rose 48.3% last month from a year earlier, beating the market forecast of 44.8%.
ING warned that the shock could intensify in the second half if supply disruptions persist. It said inventories of key materials are likely to be depleted within the next few quarters. If disruptions continue, the negative effects could become visible in the second half of this year.
Lee Jung-woo, Hankyung.com reporter, krse9059@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
