This year, South Korea's economy has shown stronger growth than expected in the first half, prompting securities firms to raise their annual economic growth forecasts. Following a surprising growth in the first quarter, the economy continued to exceed market expectations in the second quarter, making the possibility of a 3% annual growth rate more realistic.
According to the financial investment industry on July 24, major domestic securities firms have recently adjusted their forecasts for this year's real Gross Domestic Product (GDP) growth upward. This comes after the Bank of Korea reported a preliminary real GDP growth rate of 0.6% for the second quarter, surpassing both market expectations and the bank's own projections.
The economy has shown a robust performance throughout the first half of the year. The first quarter growth rate was revised upward from an initial estimate of 1.7% to 1.8%, significantly exceeding forecasts. In the second quarter, the growth rate reached 0.6%, three times higher than the Bank of Korea's forecast of 0.2%.
Typically, when the previous quarter's growth rate is high, the following quarter may experience a slowdown due to base effects. However, this year, the economy has continued to grow positively after the 1.8% growth in the first quarter, confirming a stronger-than-expected recovery.
Notably, in the second quarter, strong semiconductor exports offset the impact of rising international oil prices and increased external uncertainties due to conflicts in the Middle East. Both private consumption and exports increased, contributing to growth in domestic demand and net exports.
In light of the unexpected growth in the first half, securities firms have raised their annual growth rate forecasts. Hyundai Motor Securities increased its forecast from 2.7% to 3.2%, while Meritz Securities raised its estimate from 2.9% to 3.4%. Shinhan Investment Corp. adjusted its forecast from 3.1% to 3.3%. Korea Investment & Securities and Shinhan Investment Corp. projected growth rates of 3.2% and 3.1%, respectively, both higher by 0.5 and 0.4 percentage points from their previous estimates. iM Securities provided the highest forecast among major firms at 3.6%, while Daishin Securities anticipated a growth rate of 3.5%.
Park Sang-hyun, a researcher at iM Securities, stated, "The growth trend centered on strong semiconductor exports is expected to continue in the second half. The ongoing investment cycle in artificial intelligence (AI) in the United States will sustain the semiconductor export boom in the latter half of the year." He added, "While the increase in semiconductor export prices drove growth in the first half, we expect a relative increase in export volumes in the second half to further support this growth."
The Bank of Korea has also noted that the possibility of achieving a 3% annual growth rate has significantly increased. A Bank of Korea official stated, "Even if the average growth rate in the third and fourth quarters is only -0.1%, we can still achieve a 3% annual growth rate." Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol also remarked that the likelihood of achieving 3% annual growth and a per capita national income (GNI) of $40,000 has become very high.
Market observers are paying close attention to the potential for further upward adjustments to the Bank of Korea's growth forecast for this year. In its economic outlook released in May, the Bank of Korea assumed a growth rate of about 3.3% for the first half, but the actual growth rate is estimated to have risen to approximately 3.8% compared to the same period last year.
Kim Yu-mi, a researcher at Kiwoom Securities, noted, "Considering that the first half growth rate has exceeded initial projections by more than 0.5 percentage points, it is highly likely that the Bank of Korea will make a relatively significant upward adjustment in its economic outlook to be announced in August. The annual growth rate is expected to converge around 3.0%, close to the government's forecast."
* This article has been translated by AI.
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