JP Morgan Lowers Korea's Growth Forecast for This Year from 0.7% to 0.5% Again

Korea Economic Daily

Summary

JP Morgan reported that it has lowered South Korea's GDP growth forecast for this year to 0.5%.
Sluggish domestic demand and exports are the main reasons, and the decline in exports is expected to continue.
The Bank of Korea is expected to maintain a cautious stance due to concerns about financial imbalances, despite the need for more proactive measures.

Further Downgrade from 0.9% to 0.7% on the 8th

Global investment bank JP Morgan has once again lowered its forecast for South Korea's GDP growth rate this year on the 24th.

Following the downgrade from 0.9% to 0.7% on the 8th, it was further lowered to 0.5% today.

Seokgil Park, an economist at JP Morgan, pointed to sluggish domestic demand and exports as the background for this adjustment in the report titled 'Korea: Struggled Before Tariff Shock' released today.

He explained, "The delay in the construction cycle and political noise in the fourth quarter of 2024 and the first quarter of 2025 have delayed the recovery of domestic demand."

He further analyzed, "Real export growth over the past two quarters also fell short of expectations, and the expected solid shipments ahead of the tariff shock did not materialize."

In the second quarter, there will be a technical rebound in private consumption and the service sector due to the base effect, but the decline in exports is expected to continue in the face of mutual tariffs.

Additionally, "Policy adjustments will provide growth momentum going forward, but external demand headwinds are expected to intensify," he added, "Considering this environment, we judged that the Bank of Korea should cut the base rate at the April Monetary Policy Committee meeting."

He also stated, "The GDP growth data and outlook suggest that the Bank of Korea should take more front-loaded actions than its current stance indicates," but "Considering the Bank of Korea's cautious stance on financial imbalances and foreign exchange stability, we maintain the forecast of a 25bp (1bp=0.01% point) cut per quarter until the second quarter of 2026."

Yujin Hee, Hankyung.com Reporter keephee@hankyung.com