AMRO Raises South Korea's Growth Forecast to 3.3%

South Korea's economic growth forecast for this year has been revised up to 3.3%. The ASEAN+3 Macroeconomic Research Office (AMRO), an international organization comprising the 10 ASEAN member states plus South Korea, China, and Japan, released the revised figures in its annual Regional Economic Outlook update on the 5th (local time). Headquartered in Singapore, AMRO supports the economic and financial stability of its member economies, publishing its annual report in April and updating its forecasts in January, July, and October.

In its latest projections, AMRO put South Korea's economic growth for next year at 2.7%, up 0.5 percentage point from its July forecast of 2.2%. AMRO raised its inflation forecast for this year by 0.1 percentage point to 2.7% from the July estimate of 2.6%, while lowering next year's forecast by 0.1 percentage point to 2.3%. While core prices remain stable, it projected inflation at 1.6% this year and 1.7% next year as rising global energy and food prices feed through with a lag.

AMRO forecast that the ASEAN+3 region as a whole will grow 4.1% in both this year and next. It analyzed that increased demand for exports and investment related to artificial intelligence (AI) will partially offset the drag on domestic demand from rising energy prices.

AMRO diagnosed that downside risks to the regional economy outweigh the upside going forward. It warned that a slowdown in AI-related demand could dampen regional exports and investment. It also pointed to the possibility that the fallout from the Middle East conflict could raise energy, transport, and production costs, and that abnormal climate events such as El Niño could push up food prices. In addition, it cited a possible equity market correction driven by the strength in tech stocks, higher trade costs from additional protectionist measures, and cracks in regional supply chains as short-term risk factors.

As longer-term structural risks to the regional economy, AMRO cited geoeconomic fragmentation, population aging, and climate change.