Bank Raises South Korea’s Growth Outlook

South Korea’s economy is likely to expand 2.8 percent this year over a year earlier thanks to strong exports and robust capital spending by tech companies, Bank of Korea said Thursday, revising its earlier forecast upward slightly.

 

If growth is as forecast, Asia’s fourth largest economy will expand at its fastest pace in three years in 2017. Next year, the pace of growth will pick up moderately with the economy expanding 2.9 percent over a year earlier, the bank said. 

Computer chips, high tech

 

Strong demand for computer chips and other high tech products is helping drive the recovery. 

 

Samsung Electronics, South Korea’s largest and most valuable company, is expected to report a record quarterly profit during the second quarter, up 72 percent from a year earlier, thanks to a boom in memory chips driven by surging demand from global tech companies. 

 

Sluggish consumer spending is expected to bounce back thanks to stronger wages, the bank said. 

 

Growth could exceed the latest estimate if a $10 billion stimulus and job-creation package proposed by newly elected President Moon Jae-in after he took office in May is enacted by parliament, since the Bank of Korea’s revision does not reflect the anticipated impact from that spending. 

Other analysts disagree

 

However, some analysts view the central bank’s outlook as overly optimistic. 

 

Kwon Young Sun, an economist at Nomura Securities, said heavy household debt, the aging population and low birthrate will continue to weigh on consumer demand. Kwon is forecasting that the economy will expand at a 2.7 percent pace this year, slowing to 2.3 percent next year.

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