[트럼프 시대]Following IB, major institutions such as KDI and the Bank of Korea are expected to lower their growth forecasts.
2nd Trump term, warning of protectionism… “Uncertainty, impact of slowing growth rate”
As Korea’s economic growth rate in the third quarter of this year fell significantly below initial expectations, major institutions are expected to continue to lower their annual forecasts.
In addition, with the election of former President Donald Trump in the US presidential election, concerns are being raised that if protectionism originating from the US is repeated, the Korean economic growth rate next year could fall below the 2% range.
Although it remains to be seen how the inauguration of the second Trump administration will affect our real economy, including exports to the United States, the common view of experts is that uncertainty has increased.
According to the relevant ministries on the 10th, the Korea Development Institute (KDI), a national research institute, and the Bank of Korea will announce the economic outlook and revised economic outlook for the second half of the year on the 12th and 28th, respectively.
Currently, the prevailing view is that both organizations will adjust Korea’s annual growth rate forecast downward on this day. KDI and the Bank of Korea previously proposed growth rates of 2.5% and 2.4% for this year.
Shin Seung-cheol, director of the Bank of Korea’s economic statistics department, said when the Korean economy grew only 0.1% in the third quarter, “In order to achieve the annual growth rate forecast announced in August, we need to grow by 1.2% in the fourth quarter (October to December) alone, but it is mathematically difficult to achieve.” “I can see it,” he said. A KDI official also explained, “Adjusting the annual growth rate forecast will be inevitable.”
The successive downward revisions of forecasts by major overseas investment banks (IBs) are also a factor supporting this outlook.
According to the Center for International Finance, the average forecast for Korea’s growth rate by eight major IBs, including JP Morgan and Goldman Sachs, fell 0.2 percentage points (p) from 2.5% at the end of September to 2.3% at the end of October. As a result, the growth rate forecast of eight IBs fell from 2.7% at the end of June to 2.5% at the end of July, and was lowered again at the end of last month.
The uncertainty of the outlook due to the emergence of the second Trump administration is also casting a shadow over our economy.
For Korea, where exports are the core driving force, a blow to the overall trade balance is inevitable if the United States enforces tariff increases and regulations on China.
If this happens, Korea’s growth forecast for next year, which is currently in the low 2% range (2.1% each for the government and KDI, 2.2% each for the International Monetary Fund (IMF) and Organization for Economic Co-operation and Development (OECD)), may be disrupted.
In a report titled ‘Trumpnomics 2.0 and the Korean Economy’ released on the 7th, the Hyundai Research Institute estimates that if President-elect Trump launches a ‘second tariff war,’ the downward pressure on Korea’s economic growth rate will reach a minimum of 0.46%p and a maximum of 1.14%p. did it
There is room for our economic growth rate to fall to the 1% level.
Professor Emeritus Kim Jeong-sik of the Department of Economics at Yonsei University said, “Currently, the trade balance with the United States is increasing, but if the second Trump administration takes office, the trade surplus may decrease significantly like in the first term. Another characteristic of Trump is that he does not know what to do. “This may increase uncertainty in our economy, reduce consumption and investment, and have an impact on slowing growth rates,” he said.
Sora Cheon, a professor of economics at Inha University, said, “Depending on when tariffs or regulations are implemented in earnest, the timing of their impact on our real economy may vary,” but added, “The direction in which uncertainty has increased is correct.”
(Sejong = News 1)
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Interview between the Time.news Editor and Professor Kim Jeong-sik, Expert in Economics
Time.news Editor: Welcome, Professor Kim Jeong-sik. Thank you for joining us today shortly after the U.S. election results. With Donald Trump’s victory, there are rising concerns about the potential implications for the South Korean economy. What’s your initial assessment of this situation?
Professor Kim Jeong-sik: Thank you for having me. Indeed, Trump’s re-election poses significant uncertainty for the Korean economy. His past administration was marked by protectionist policies, and there is a strong possibility that we might see a repeat of this approach—particularly in terms of tariffs and trade regulations.
Time.news Editor: You mentioned protectionism. How could this directly affect South Korea, especially considering that exports are pivotal to its economy?
Professor Kim Jeong-sik: South Korea’s economy heavily relies on exports, particularly to the U.S. If Trump implements tariffs on China, as he did previously, it would create a ripple effect that could destabilize our trade balance. This would inevitably hinder our economic growth, with estimates suggesting a potential dip in Korea’s growth rate of up to 1.14% due to these policies.
Time.news Editor: That’s a sobering perspective. Recent reports from institutions like the Korea Development Institute and the Bank of Korea indicate that they expect to lower their growth forecasts for the coming year. How do you see this trend evolving in light of Trump’s presidency?
Professor Kim Jeong-sik: Given the current volatility and the mixed signals from the U.S. economic policy landscape, it is reasonable for these institutions to lower their forecasts. The previously estimated growth rates hovering in the low 2% range could face significant downward pressures. The external environment is key, and if tariffs are implemented, both consumption and investment within Korea could decline.
Time.news Editor: Speaking of forecasts, can you delve into the significance of banks and investment firms revising their growth projections? How much credibility do these revisions hold?
Professor Kim Jeong-sik: The adjustments made by major investment banks, such as JP Morgan and Goldman Sachs, are indeed noteworthy. Their global reach and analytical capabilities lend significant weight to their forecasts. As these banks typically assess economic conditions from a global perspective, their downward revisions reflect a broader consensus among experts about potential economic turbulence.
Time.news Editor: In a report titled ‘Trumpnomics 2.0 and the Korean Economy,’ the Hyundai Research Institute predicts that economic growth could slow significantly. What does this suggest about the relationship between U.S. economic policy and Korean economic health?
Professor Kim Jeong-sik: This report underscores the interconnectedness of global economies. U.S. policies can have pronounced effects on Korea due to our export-driven model. Therefore, any shifts in U.S. economic dynamics—especially under a Trump-led administration—could reverberate through our economy. The potential trade surplus we currently enjoy with the U.S. could diminish, signaling a worrying trend for Korean exporters.
Time.news Editor: With these uncertainties looming, what steps should South Korea consider taking to mitigate the potential fallout from U.S. protectionism?
Professor Kim Jeong-sik: Flexibility will be crucial. South Korea might pursue diversification in its trade relationships, enhancing ties with other regions. Strengthening internal economic policies to boost domestic consumption and investment will also be vital in cushioning against any shocks from abroad. a proactive and adaptive approach to international relations will be essential to navigate this complex situation.
Time.news Editor: Thank you, Professor Kim, for your insights. This is certainly a critical time for the South Korean economy, and your expertise helps clarify the complexities involved.
Professor Kim Jeong-sik: Thank you for having me. It’s vital to stay vigilant and informed, as the coming months are likely to bring significant challenges and opportunities.