Korea’s economy has continued to recover amid improving consumption despite the worsening of external conditions. The growth of exports has slowed due to lockdown in China. Consumption has continued to recover centering on face-to-face service consumption after the lifting of social distancing measures, and the sluggishness of facilities investment appears to be easing.
Looking ahead, GDP growth in 2022 is forecast to be somewhat lower than the level of the May projection. The path of growth is surrounded by heightened uncertainties related to interest rate hikes in major countries and the war in Ukraine. Among the upside risks to growth are an early resolution of the war in Ukraine, an expansion of China’s economic stimulus measures, and an increase in investment in new growth industries. Downside risks include accelerating interest rate hikes in major countries, a prolonged war in Ukraine, and continued lockdown in China. Consumer price inflation is expected to exceed the forecast level in May led by continued high oil prices and increased demand-side inflationary pressure due to the lifting of social distancing measures. The current account balance is expected to continue its surplus this year, but at a level somewhat smaller than the forecast level in May.