SEOUL, Aug. 23 (Yonhap) — The ASEAN-sponsored economic research agency on Monday raised its 2021 growth forecast for the South Korean economy to 3.9 percent, citing solid recovery in exports and facility investment.
The projection by the ASEAN+3 Macroeconomic Research Office (AMRO) marks an increase from its March estimate of 3.2 percent. The agency forecast Asia’s fourth-largest economy would expand 3 percent next year.
The Singapore-based organization was established in 2011 to promote macroeconomic and financial stability in the Asian region, which covers the 10-member Association of Southeast Asian Nations (ASEAN) and its three Northeast Asian partners — South Korea, China and Japan.
AMRO’s growth outlook is lower than the 4 percent forecast by the Bank of Korea (BOK) and growth projection of 4.3 percent by the International Monetary Fund.
The agency said the Korean economy is continuing its “strong rebound” this year on the back of the global economic recovery and robust exports.
“In contrast, high household debt and uncertain employment prospects would be a drag on private consumption,” AMRO said in an annual consultation report on Korea.
The country’s gross domestic product (GDP) grew 0.7 percent in the second quarter from three months earlier, compared with a 1.7 percent on-quarter gain in the first quarter, central bank data showed.
Exports rose 40.9 percent on-year in the first 20 days of August on the back of robust demand for chips, autos and petroleum products, according to customs data. In July, overseas shipments grew 29.6 percent on-year to a record high of US$55.4 billion, extending their gains to the ninth straight month.
But the latest resurgence in COVID-19 cases and the fast spread of the delta variant are feared to dampen improving private spending, possibly sapping economic recovery momentum.
AMRO recommended South Korea maintain expansionary fiscal policy and an accommodative monetary stance to ensure that the recovery remains on track.
It also called for the need to maintain “stringent” macro-prudential measures to tackle financial imbalances caused by household debt and rising asset prices.
The BOK kept its benchmark interest rate at a record low of 0.5 percent in July amid the fourth wave of the pandemic.
BOK Gov. Lee Ju-yeol strongly hinted the central bank may hike the rate by the end of this year, raising the need for orderly reversing easy monetary policy. Its next rate-setting meeting is scheduled for Thursday.