The Korean economy is expected to post a year-on-year rate of growth of 3.8% in 2014 compared with 2.8% growth in 2013, the Bank of Korea(BoK) announced on Jan9.
Looking at the sectoral contributions to growth on the expenditure side, those of domestic demand (1.8%p) and of exports (2.0%p) will be generally similar.
The rate of growth of gross domestic income (GDI) (4.8%) will exceed that of GDP (3.8%) in 2014, as in 2013, due to improvements in the terms of trade as a result of unit import price stability owing for example to the decline in international oil prices.
The 2013 and 2014 GDP growth forecasts (2.8%, 3.8%) remain unchanged from those drawn up in October 2013, as positive factors such as updates reflecting the actual performance figures and the downward adjustments of international commodity prices, and negative factors including the weakening of the yen offset each other.
The ratio of the current account surplus to GDP is projected to fall from 5.7~5.8 percent in 2013 to4.1~4.2 percent in 2014, and then to 3.1~3.2 percent in 2015.
The current account surplus is forecast to stand at 55.0 billion dollars in 2014, larger than the October 2013 forecast.
In terms of the future growth path, the risks are assessed as neutral, as downside risks including global financial market unrest following QE tapering, the possibility of heightened volatility of the yen, and North-Korea related geopolitical risks, and upside risks such as growth trend accelerations in the US and EU are seen as likely to balance each other out.
As for the price path, there are both upside risks, such as a jump in agricultural product prices caused by bad weather conditions, and downside risks including declines in international commodity prices due to a slowing of the global economic recovery, but taken as a whole the risks are appraised as neutral.