South Korea experiences steady recovery, slightly increases growth forecast for 2022

SEOUL (Reuters) – South Korea expects the economy to grow steadily in 2022, as domestic demand rebounds and export sales remain strong, but said it would continue to grow. provide fiscal stimulus to help accelerate the pace of recovery.

FILE PHOTO: Workers walk past a construction site in Seoul, South Korea, October 2, 2018. REUTERS / Kim Hong-Ji

The finance ministry downgraded its growth forecast for 2021 a little, but slightly improved its economic outlook for 2022 in its semi-annual economic policy report.

Gross domestic product is expected to rise 3.1% next year, from a previous forecast of 3.0%, the finance ministry said. He expects the economy to grow 4.0% this year, at its fastest pace in 11 years, compared to a previous forecast of 4.2% growth.

“We expect the economy to maintain solid growth in 2022. Economic normalization will accelerate through uniform growth in domestic demand and exports,” Deputy Finance Minister Lee Eog-won said on Friday. during an embargoed press conference.

South Korea’s economy grew at a slower-than-expected pace in the third quarter, as robust exports were offset by weak domestic demand and investment in construction and facilities, Bank of Korea data shows in October.

But consumption is expected to rebound after the government eased restrictions on coronaviruses last month here, although South Korea reinstated stricter social distancing rules on Saturday, clouding the outlook.

The finance ministry expects private consumption growth of 3.8% in 2022 and exports to jump 2.0% to a record $ 656.0 billion next year. Exports are forecast to increase 25.5% in 2021, after rebounding sharply from a pandemic-induced slump last year, propelled by recoveries after lockdowns in major markets, which have boosted demand for crisps and crisps. Korean petrochemicals.

The spread of the Omicron variant, supply chain disruptions and growing household debt remain major risks to South Korea’s growth prospects, the deputy finance minister said.

Meanwhile, the government plans to spend 63% of its record annual budget of 607.7 trillion won ($ 510.77 billion) in the first half of 2022, the ministry said, although it aims to gradually cut back. financial support measures in the era of the pandemic.

For example, the ad hoc vehicle put in place by the government and the central bank to buy low-rated corporate bonds and commercial paper aimed at calming the local debt market will cease operations by the end of 2021. , the ministry said.

The ministry also said it would create at least 1.06 million new jobs for vulnerable seniors, youth and people with disabilities in 2022.

Separately, the Ministry of Finance said that it will completely overhaul the foreign exchange transaction system to improve the access of foreign traders to its foreign exchange market, as it aims to be included in the MSCI index of markets. developed. He did not provide further details.

($ 1 = 1,189,7,700 won)

Reporting by Joori Roh; Editing by Ana Nicolaci da Costa

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