Korea Institute for Industrial Economics & Trade “Economic growth rate of 2.0% in 2024, exports increase, but domestic demand slows”

[비즈니스포스트] The Korea Institute for Industrial Economics and Trade, a national research institute, predicted Korea’s economic growth rate to be 2.0% in 2024.

In the ‘2024 Economic and Industrial Outlook’ report published on the 20th, the Korea Institute for Industrial Economics and Trade predicted that “while the global economy is expected to show limited growth next year due to geopolitical uncertainty and high interest rates, the domestic economic growth rate will be around 2.0%.”

Next year’s economic growth rate forecast of 2.0% is higher than this year’s economic growth rate forecast of 1.3%, but is lower than the forecast (2.2%) previously released by the International Monetary Fund (IMF) and Korea Development Institute (KDI).

The Korea Institute for Industrial Economics and Trade predicted that the information and communications (IT) industry will recover in 2024 and exports will increase, but economic growth will be limited as the negative impact of high inflation and high interest rates on the economy begins to take hold.

The Korea Institute for Industrial Economics and Trade (KIET) said, “Despite the upward trend in exports and facility investment thanks to the gradual recovery of the IT economy, the negative impact of high inflation and high interest rates will begin in earnest,” adding, “Due to the slowdown in consumption growth and the decline in construction investment, the growth rate will drop by 2% compared to the previous year. “Growth is expected,” he explained.

Exports are expected to increase by 5.6% compared to the previous year due to the improvement in the semiconductor industry, automobiles maintaining a solid export volume, and the base effect and gradual recovery of world trade in the previous year (2023).

On the other hand, imports are expected to decrease by 0.7% compared to the previous year due to the combined effects of the increase in imports of intermediate goods due to improved export industry conditions and the decline in oil prices. Accordingly, the trade balance was expected to be in surplus of $26.5 billion (approximately 34.2247 trillion won) per year.

In 2024, private consumption and facility investment are expected to increase by 1.9% and 2.1%, respectively, compared to this year, and construction investment is expected to decrease by 0.2%.

The Korea Institute for Industrial Economics and Trade judged that “the growth of private consumption will be limited by the expansion of interest burden due to high interest rates and high household debt, the decline in asset values ​​due to the expansion of financial sector and geopolitical uncertainty, and the weakening of purchasing power due to high inflation.”

Regarding facility investment and construction investment, “While investment in the automobile industry is expected to expand to respond to the solid demand for eco-friendly vehicles, facility investment is expected to decrease slightly due to the gradual recovery of the semiconductor industry, planned investment execution by related major companies, and base effect. “Despite the government’s SOC budget and the expected increase in civil engineering orders, leading indicators such as the increase in unsold units, new permits and construction starts, and the amount of construction orders are sluggish, showing a slight decrease compared to this year,” he explained. did. Reporter Kim Dae-cheol