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1、 This report is the English version of the“Korea Economic Outlook”published on May 29,2024.Please contact the Research Department at the email address below if you have any questions regarding the contents or would like to request permission in advance for reproducing or copying the contents of this

2、 report for commercial purposes.Please credit the source when quoting,reproducing,or copying the contents of this report for non-commercial purposes.Research Department,Business Cycle Team,Bank of Korea econtrendbok.or.kr Contents Executive Summary .Macroeconomic Conditions and Outlook 1.Domestic an

3、d International Economic Conditions Global Economy Koreas Economy Main Premises of the Baseline Outlook 2.Macroeconomic Outlook for Korea Economic Growth Current Account Prices Employment 3.Risk Assessment Key Risks to the Outlook Distribution of Growth Projections by Major Institutions Scenario Ana

4、lysis 1 1 7 12 13 13 18 20 23 25 25 25 26 Box 1 Assessment of Recent G2 Economic Situations and Implications Box 2 Assessment of Recent Semiconductor Business Cycle 28 35 .Key Issues High Prices and Consumption:With a Focus on the Heterogeneous Impact of the Household Consumption Basket and Financia

5、l Assets 39 .In-Depth Analysis Innovation and Economic Growth:Review of Korean Firms Innovation Performance 56 Appendix.Key Indicators 104 i Executive Summary In 2024,Koreas real GDP is expected to grow by 2.5%,higher than the previous forecast of 2.1%in February,as the recovery momentum of exports

6、strengthened and improvement in consumption has been better than previously anticipated.While upward pressure on consumer price inflation has increased due to a better-than-expected growth,it is not large enough to revise the February forecast(2.6%headline,2.2%core)considering a modest consumption r

7、ecovery.(%)2023 2024e)1)2025e)1)GDP growth rate 1.4 2.5 0.4%p 2.1 0.2%p Headline inflation 3.6 2.6 unchanged 2.1 unchanged(Core inflation)3.4 2.2 unchanged 2.0 unchanged Note:1)indicates change from the February 2024 projection.I.Since the last February forecast,geopolitical risks have increased ami

8、d the possibility of a soft landing for the global economy,and the expectations for interest rate cuts in major countries have receded somewhat.Domestically,growth momentum strengthened in the first quarter,although the recovery of domestic demand was somewhat affected by transitory factors.Looking

9、at external conditions,as the global economy has continued to show more resilience than expected,the outlook for growth in major countries has been revised upward(Figure 1).The global manufacturing sector showed signs of improvement,especially in emerging markets(Figure 2),and,in particular,the IT s

10、ector is expected to grow faster than expected thanks to demand for investments in AI(Figure 3).Inflation in major countries have continued to slow,although its paces are diverged.While expectations in financial markets for rate cuts by the U.S.Federal Reserve have diminished somewhat,some central b

11、anks have begun to cut interest rates or are likely to do so soon(Figure 4).Meanwhile,global oil prices have fluctuated significantly in line with developments in the conflicts in the Middle East,and the upward pressure on oil prices has increased more than expected in the previous forecast,mainly d

12、ue to rising geopolitical risks(Figure 5).Domestically,the growth outlook for this year has been revised upward,as domestic demand exceeded expectations in the first quarter,driven by consumption and construction investment.However,the recovery of domestic demand was somewhat affected by transitory

13、factors*in the first quarter,a moderation is expected in the second quarter.(Figure 6).*Favorable weather led to an increase in consumption related to outdoor activities such as clothing and vehicle fuel consumption as well as rapid progress on major construction projects,early government transfer p

14、ayments,and early launch of new mobile phone models.ii Figure 1.Changes in global growth and price outlook for 20241)Figure 2.Global manufacturing PMI Note:1)Change in(median)market projections in March,April,and May,compared with February 2024.Source:Bloomberg(May 9).Source:S&P Global.Figure 3.Outl

15、ook for AI-related semiconductor business Figure 4.Policy rates in major advanced economies Rate pivot in Europe Outlook for policy rates in U.S.and euro area1)Source:Gartner.Note:1)As of the end of quarter.The shaded area indicates the median of policy rate projections by major forecasting agencies

16、,and the dotted line indicates projections as of Feb.2024.Sources:Bloomberg(May 20),central banks of each country.Figure 5.Trend of global oil prices1)2)Figure 6.GDP private consumption1)Notes:1)Brent crude oil based on near-term future prices.2)Data until May 17.Source:Bloomberg.Note:1)Real seasona

17、lly-adjusted time series,as of May 20.Source:Bank of Korea.iii II.The global economy is expected to maintain its moderate growth path.In the United States,economic growth is expected to continue at a favorable pace,supported by rising consumption and investment.The euro area will likely experience m

18、odest recovery from the sluggish growth last year,mainly driven by consumption.In China,growth is projected to continue in the high 4%range,supported by improvement in exports and supportive government policies.Global trade is expected to improve*,mainly driven by a rise in goods trade,and,in partic

19、ular,the effective import demand of Koreas export destinations will likely recover at a faster rate than global trade in general*.*World trade growth rate(IMF WEO,April 2024):0.3%in 2023 3.0%in 2024e 3.3%in 2025e*Effective import demand of top 10 trading partners#(IMF WEO,April 2024):-0.8%in 2023 3.

20、8%in 2024e 3.0%in 2025e#United States,China,Euro area,Vietnam,Japan,Hong Kong,Taiwan,Singapore,India,and Australia Global oil prices are projected to fluctuate within the$80 band range,due to the mixed effects from upside factors such as continuing geopolitical risks and downside factors including t

21、he increase in non-OPEC+production.III.This year,Koreas economy is projected to grow by 2.5%,higher than the previous forecast of 2.1%in February.Due to a decline in construction investment,slowdown in consumption*and lower contribution from net exports*,growth in the second quarter is expected to m

22、oderate,before picking up in the second half of the year.*Consumption,after a moderation in the second quarter,is expected to gradually pick up in the second half of the year thanks to improvement in household income conditions from lower inflation and higher corporate earnings.*The contribution of

23、net exports in the second quarter will likely decline considerably compared to the previous quarter due to a strong increase in imports,but solid export growth,aided by more favorable external conditions,will continue to drive economic growth.Global growth and trade outlook1)Koreas growth outlook by

24、 sector1)Outlook on GDP growth(%)2023 2024e)2025e)Global economy 3.2 3.1 3.1 3.0 3.1 U.S.2.5 2.5 1.8 2.0 1.7 Euro area 0.4 0.8 1.5 0.7 1.7 China 5.2 4.7 4.4 4.6 4.5 Global trade 0.3 3.1 3.5 3.2 3.6 (%)2023 2024e)2025e)GDP 1.4 2.5 2.1 2.1 2.3 Private consumption 1.8 1.8 2.3 1.6 2.3 Facilities investm

25、ent 0.5 3.5 3.9 4.2 3.7 Construction investment 1.3-2.0-1.1 -2.6-1.0 Goods exports 3.1 5.1 3.0 4.5 3.6 Note:1)indicates forecasts as of February 2024.Source:Bank of Korea.Note:1)Outlook in Feb.2024 for 2025 are on an annual basis.Source:Bank of Korea.iv IV.While upward pressure on consumer price inf

26、lation has increased due to a better-than-expected growth momentum and higher exchange rates,modest consumption recovery and price stability policies by the government are expected to mitigate these pressures.Taken together,recent inflationary pressures are not sufficient to revise the February fore

27、cast(2.6%headline,2.2%core)*.*The CPI fell from 3.1%in March to 2.9%in April,as core inflation eased slightly from 2.4%to 2.3%and the rise in prices of agricultural and marine products moderated.Going forward,consumer price inflation is expected to remain in the high 2%range for some time,but will f

28、all below 2.5%in the second half of the year.V.The current account surplus is projected to be$60 billion this year,surpassing the previous forecast of$52 billion.The surplus*is expected to be larger than the previous forecast,driven by stronger exports on the back of IT sector recovery and robust gr

29、owth in the US.*Current account balance(monthly average,USD billion):Q3 2023 5.2 Q4 2023 6.2 Q1 2024 5.6 Trade balance(monthly average,USD billion):Q3 2023 2.1 Q4 2023 3.2 Q1 2024 3.0 Apr 2024 1.5 VI.The number of employed persons is expected to increase by 260,000,generally in line with the previou

30、s forecast of 250,000.Employment growth in the services sector is expected to slow,mainly for in-person services,but total employment growth is expected to be broadly in line with the previous forecast as manufacturing employment picks up thanks to improved business conditions and labor supply of wo

31、men and older workers remains strong.Unemployment rate is projected to rise slightly to 2.9%from 2.7%last year,the lowest level since 2000.Outlook on inflation,current account,and employment1)Outlook on headline CPI Outlook on current account1)2)2023 2024e)2025e)Headline inflation(%)3.6 2.6 2.1 2.6

32、2.1 Core inflation(%)3.4 2.2 2.0 2.2 2.0 Current account 35.5 60.0 61.0 (USD billion)52.0 59.0 Increase in Number of the employed 33 26 18 (10,000 persons)25 18 Note:1)indicates forecasts as of February 2024.Sources:Bank of Korea,Statistics Korea.Note:1)Outlook in Feb.2024 for 2025 is on an annual b

33、asis.Sources:Bank of Korea,Statistics Korea.Notes:1)Monthly average.2)In February projection,figure for the year 2025 is based on annual projection.Sources:Bank of Korea,Statistics Korea.v VII.Regarding the future outlook,there is a high degree of uncertainty in relation to growth and price trends,m

34、onetary policies in major economies,the pace of expansion in the IT industry,global oil prices,and exchange rate movements.For prices,the degree of diffusion of price hikes by companies and the timing of adjustment in utility rates are potential risk factors.VIII.Given the high level of uncertainty

35、around the future outlook,we analyzed two alternative scenarios:one related to geopolitical conflicts and the other to the global monetary policy stance.Scenario 1 Global geopolitical conflict:Faster-than-expected easing(optimistic)vs.Deepening(pessimistic)Scenario 1(optimistic):If a ceasefire deal

36、is reached between Israel and Hamas,and the Russia-Ukraine conflict abates,negative supply shocks will be mitigated,leading to a 0.1%p increase in growth and a 0.1%p decrease in inflation this year compared to the baseline.Scenario 1(pessimistic):If the conflict in the Middle East intensifies and th

37、e Russia-Ukraine war escalates,growth is estimated to decline by 0.2%p,and inflation to increase by 0.3%p this year due to higher prices of key commodities and deteriorating financial conditions.Scenario 2 Prolonged global tightening In the case of prolonged global tightening,global trade and growth

38、 will slow down and Koreas economic growth is expected to fall by 0.1%p this year.Inflation is projected to remain broadly in line with the baseline forecast,reflecting the mixed effects of exchange rate depreciation and domestic slowdown due to prolonged tightening.GDP growth rate Headline inflatio

39、n(YoY,%)2023 2024e)2025e)Baseline 1.4 2.5 2.1 Scenario 1(optimistic)+0.1+0.3 Scenario 1(pessimistic)-0.2-0.5 Scenario 2 -0.1-0.2 (YoY,%)2023 2024e)2025e)Baseline 3.6 2.6 2.1 Scenario 1(optimistic)-0.1-0.1 Scenario 1(pessimistic)+0.3+0.2 Scenario 2 -0.1 Source:Bank of Korea.In general,Koreas economy

40、is expected to improve at a favorable pace,as export growth remains solid supported by an upturn in the IT sector and the recovery of major economies,and the growth path of consumption has also been revised upwards.Inflation will likely maintain its decelerating trend,but there is a high level of un

41、certainty about the outlook.We need to see further inflation developments in order to increase our confidence that inflation will converge to the target in a sustained manner.vi Economic Outlook Summary(May.2024)2023 2024e)2025e)Year H1 H2 Year5)H1 H2 Year5)Main premises of the baseline outlook Worl

42、d economic growth(%)1)3.2 3.1 3.0 3.1 +0.1 3.1 3.1 3.1 -United States 2.5 3.0 2.0 2.5 +0.5 1.7 1.8 1.8 +0.1 Euro area 0.4 0.4 1.2 0.8 +0.1 1.5 1.5 1.5 -0.2 China 5.2 4.8 4.5 4.7 +0.1 4.3 4.5 4.4 -0.1 Japan 1.9 -0.1 1.6 0.8-0.1 1.6 0.3 0.9 -World trade growth(%)1)0.3 2.1 4.1 3.1 -0.1 3.9 3.3 3.5 -0.1

43、 Brent oil price(USD/barrel)2)82 85 85 85 +2 81 80 81 -Domestic economic outlook GDP growth(%)1)1.4 2.9 2.2 2.5 +0.4 1.8 2.5 2.1 -0.2 Private consumption 1.8 1.4 2.2 1.8 +0.2 2.4 2.3 2.3 -Facilities investment 0.5 1.2 5.7 3.5 -0.7 5.8 2.1 3.9 +0.2 IPP investment 1.6 2.2 2.6 2.4+0.2 2.6 3.9 3.3 -Cons

44、truction investment 1.3 -1.1 -2.7 -2.0 +0.6 -2.7 0.3 -1.1 -0.1 Goods exports 3.1 7.0 3.4 5.1 +0.6 2.5 3.6 3.0 -0.6 Goods imports-0.6 -0.8 5.6 2.4 -0.3 5.1 1.2 3.1 -Headline inflation(%)1)3.6 2.9 2.4 2.6 -2.2 2.1 2.1 -Core inflation3)3.4 2.4 2.1 2.2 -2.1 2.0 2.0 -Current account(USD billion)35.5 27.9

45、 32.1 60.0+8.0 28.0 33.1 61.0+2.0 Goods 34.1 36.0 34.7 70.7+7.5 40.1 39.6 79.6+2.0 Services -25.7 -12.3-12.5-24.8+0.3 -15.4-16.2-31.6 -Primary and secondary income 27.1 4.2 9.9 14.1+0.2 3.3 9.7 13.0 -Change in number of employed persons(10,000 persons)1)33 27 24 26+1 22 15 18 -Unemployment rate(%)2.

46、7 3.0 2.7 2.9 -3.1 2.7 2.9 -Employment rate(%)4)62.6 62.5 63.1 62.8 -62.8 63.2 63.0 -Notes:1)Year-on-year.2)By period average.3)Excluding food and energy.4)Aged 15 and over.5)Figures in show the changes from projections made in February 2024.Sources:Bank of Korea,Statistics offices in each area,Bloo

47、mberg.1 .Macroeconomic Conditions and Outlook 1.Domestic and International Economic Conditions Global Economy 1.1.The global economy is seen as having a greater chance of a soft landing due to favorable employment conditions and signs of improvement in the manufacturing sector.The global economy has

48、 shown favorable growth despite the deterioration of the economic environment,including ongoing geopolitical tensions and rising trade conflicts.Global services sector is on an upward trend amid the boom in AI software and financial industries in major advanced countries,supporting buoyant employmen

49、t.As for global manufacturing,both the non-IT and IT sectors are showing signs of a gradual recovery from their sluggishness.Inflation has slowed overall,although the pace of deceleration varies across countries.In the U.S.,in particular,inflationary pressures in the services sector have persisted,c

50、ausing the disinflation process to stall.As a result,market expectations regarding the timing of pivot by the Fed have been revised,1 leading to increased volatility in global asset prices.Looking ahead,while growth in advanced economies will be driven by domestic demand based on a favorable labor m

51、arket,emerging market economies have increased facilities investment in line with the improvement in the manufacturing sector and restructuring of supply chains.As a result,the global economy is projected to continue to grow at a pace slightly above the February forecast.2 However,the growth rate pr

52、ojection for this year are still below the long-term average of 3.7%from 2010 to 2019.Global trade has recovered,supported by improvements in manufacturing and travel services,and is expected to grow gradually on the back of goods trade.However,deepening trade tensions between major countries3 and t

53、he possibility of a delay in monetary easing are seen as downside risks.1 The timing of the start of U.S.policy rate cuts anticipated by financial markets has been gradually pushed back,with the number and magnitude of the cuts revised downward.Time of projections Timing of first cut No.of cuts in 2

54、0241)Magnitude of cuts1)January MPB meeting March 2024 6 times 150bp February projection June 2024 3 times 75bp April MPB meeting July 2024 2 times 50bp May projection(as of May 15)September 2024 2 times 50bp Note:1)Based on the interest rate path with the highest probability among market participan

55、ts expectations.Source:CME Fed Watch.2 The IMF revised this years global economic growth rate for 2024 upward from 3.1%to 3.2%,while the OECD raised it from 2.9%to 3.1%(April 2024).3 The U.S.has decided to increase tariffs on Chinas steel and aluminum products and electric vehicles,under Section 301

56、 of the Trade Act of 1974,by 17.5 to 25%p(0 to 7.5%25%)and 75%p(25%100%),respectively,while the EU is more likely to impose tariffs depending on the outcome of its investigation into subsidies paid for Chinas electric vehicles.2 Global services sector continues to improve,and manufacturing rebounds

57、Goods trade rebounds slightly Figure 1.1.Global PMI Figure 1.2.Global goods trade Source:JPM.Source:CPB.1.2.Among major countries,the U.S.economy is expected to continue to grow at a favorable pace,supported by a sustained increase in domestic demand.In the first quarter,GDP growth(1.6%QoQ,annualize

58、d)slowed significantly due to a decline in net exports4 from the previous quarter(3.4%),but growth momentum5 has remained solid due to the resilience of personal consumption and private investment.6 This year,the U.S.economy is expected to grow at around the mid-2%range,a level similar to last year,

59、driven mainly by domestic demand amid expanding labor supply.7 However,with disinflation being hampered by inflationary pressures in the services sector,uncertainty about the Feds monetary easing has increased,and the direction of economic policy,which depends on the results of the U.S.presidential

60、election in November,remains as risk factors.U.S.continues to show favorable growth,led by domestic demand in the first quarter Disinflation is delayed by price pressures in the services sector Figure 1.3.Contribution to U.S.GDP growth Figure 1.4.Contribution to U.S.consumer price inflation Source:U

61、.S.Bureau of Economic Analysis.Source:U.S Bureau of Labor Statistics.4 Although exports of commodities such as petroleum and natural gas were sluggish,imports accelerated,especially in capital goods,turning net exports contribution to growth negative(+0.25%p in Q4 2023 -0.86%p in Q1 2024).5 Final sa

62、les to private domestic purchasers(personal consumption expenditures+gross private fixed investment)continued to grow at the 3%level(annual rate,QoQ,%,+3.0 in Q3 2023 +3.3 in Q4 +3.1 in Q1 2024).6 Although employment growth slowed and retail sales were flat in April,the likelihood of the economy mak

63、ing a soft landing has increased.7 With the accelerated inflow of immigrants and return of prime-age workers(25-54)to the labor market after the reopening,the labor force participation rate(62.7%in April 2024)is approaching the level seen before the pandemic shock(62.9%on average from 2015 to 2019).

64、3 1.3.The euro area economy is forecast to recover modestly from its sluggishness,mainly driven by household consumption.In the first quarter of this year,the euro area economy rebounded from negative growth in the second half of last year thanks to an improvement in services sector8 and increase in

65、 net exports in major countries.Germany returned to positive growth with increases in construction investment and exports,and Spain continued to grow positively on the back of a boom in tourism.9 Looking ahead,the euro area economy is projected to improve moderately,led by household consumption,supp

66、orted by an improvement in real household income as a result of moderating inflation and nominal wage growth.10 As disinflation has progressed,particularly in food and goods,the likelihood of interest rate cuts starting in June has increased.More recently,however,expectations for rate cuts by the Fe

67、d have receded,adding to uncertainty about further easing of monetary policy.11 Euro area economy rebounds,mostly in services sector,in the first quarter Trend of slowing inflation continues Figure 1.5.Euro area GDP and PMI Figure 1.6.Euro area inflation rate Sources:Eurostat,S&P Global.Source:Euros

68、tat.1.4.Chinas economy is expected to grow at a rate in the high 4%range this year,despite a slump in the property sector,on the back of improved exports and supportive government policies.In the first quarter,Chinas economy grew at a faster-than-expected pace with increased investment in the manufa

69、cturing and SOC sectors and rising exports,particularly of IT sectors,and despite a slump in the property sector.However,growth of manufacturing output slowed in March compared with January and February,and exports moved into decline,12 leading to a modest slowdown in economic growth.Going forward,t

70、he Chinas government is expected to implement a policy to support the replacement of old equipment and consumer goods13 as well as promote growth through expansionary fiscal policy by issuing ultra-long special treasury bonds14 and practicing accommodative monetary policy.15 8 Services sector PMI in

71、 the euro area(benchmark=50):49.2 in Q3 2023 48.4 in Q4 50.0 in Q1 2024 53.3 in April 9 GDP growth rates in major countries in the euro area(QoQ,%):Euro area:-0.1 in Q4 2023 +0.3 in Q1 2024,Germany:-0.5 +0.2,France:+0.1 +0.2,Italy:+0.1 +0.3,Spain:+0.7 +0.7 10 The excess savings accumulated steadily

72、following the onset of the pandemic(estimated at around 7%of GDP in Q4 2023)are also expected to support the recovery of consumption in the euro area.11 In an interview with Le Monde on April 16,Vice-President Luis de Guindos of the European Central Bank said that,although a rate cut is likely in Ju

73、ne,how quickly the ECB can cut interest rates after that depends on the geopolitical situation and its potential impact on oil prices,as well as whats happening in the U.S.,where inflation is higher.12 Chinas exports rose by 1.5%year-on-year in April,only maintaining the level of the first quarter(1

74、.5%).13 At the Two Sessions in March 2024,the Chinas government decided to implement a policy to encourage consumers and enterprises to replace old durable goods and equipment with new ones in order to induce new investment and consumption and,in April,announced a measure to subsidize the replacemen

75、t of old cars.14 Chinas National Development and Reform Commission(NDRC)said on April 17 that it will carry out proactive fiscal spending from the second quarter of this year by issuing ultra-long special treasury bonds and special local government bonds.15 On March 6,2024,Governor Pan Gongsheng of

76、the Peoples Bank of China(PBOC)emphasized that China has various monetary policy instruments at its disposal and that there is still room for accommodative monetary policy.4 China records favorable growth rate in the first quarter Sluggishness in real estate continues Figure 1.7.Chinas economic grow

77、th Figure 1.8.Chinas real estate indicators Source:National Bureau of Statistics of China.Source:National Bureau of Statistics of China.1.5.Japans economy saw its growth stall due to production disruptions,but it is forecast to exceed its long-term average growth rate for the year as a whole.In the

78、first quarter,Japans economy once again recorded negative growth16 due to the contraction in output associated with the suspension of production at some automobile plants17 and continued sluggish consumption.18 Nevertheless,for the year as a whole,it is expected to grow at a rate above its long-term

79、 average growth rate(0.6%,2007-2018),as the slump in consumption eases and facilities investment19 rises,supported by increasing wage hikes20 and slowing inflation.Meanwhile,the Bank of Japan started21 to implement monetary policy normalization in March,based on its assessment that inflation will no

80、t fall below its target during the projection period,22 and is expected to gradually raise interest rates.23 16 Real GDP growth rate(QoQ,%):+1.0 in Q2 2023 -0.9 in Q3 +0.0 in Q4 -0.5 in Q1 2024 Private consumption(QoQ,%):-0.7 in Q2 2023 -0.3 in Q3 -0.4 in Q4 -0.7 in Q1 2024 17 Daihatsu(9.6%of Japans

81、 automobile production in 2023)suspended production in Japan from the end of December 2023 following a safety test scandal and resumed production sequentially from February 2024,with all plants back in operation from May 7.18 Consumption capacity is being constrained by the continued decline in real

82、 wages due to high prices(YoY,-2.1%in Dec.2023 -1.1%in Jan.2024 -1.8%in Feb.-2.5%in Mar.).19 Massive investments in Japan were announced by global semiconductor companies,such as Taiwans TSMC(JPY 2 trillion)and the U.S.Micron Technology(JPY 500 billion)and Western Digital(joint venture with Kioxia C

83、orporation,JPY 729 billion).20 In 2024,the annual spring wage negotiations resulted in an average pay raise of 5.2%(fifth round on May 8),the highest since 1991(5.7%).21 In its monetary policy meeting,the Bank of Japan ended its negative interest rate policy,abandoned a yield curve control policy to

84、 manage 10-year government bond yields,and tapered off new purchases of risk assets such as exchange-traded funds and real estate investment trusts.22 Inflation projections of the Bank of Japan(excluding fresh food,%):2.8 for 2023 2.8 for 2024 1.9 for 2025 1.9 for 2026 23 Market participants expect

85、an interest rate hike(0.1%p)by the end of this year(Bloomberg,Japan Center for Economic Research(JCER)survey).5 Japan returns to negative growth in the first quarter Nominal wage rises and inflation slows Figure 1.9.Contribution to Japan GDP growth Figure 1.10.Japans wage and consumer price inflatio

86、n Source:Japans Cabinet Office.Note:1)Data for 2020 to 2023 are based on final data(seventh round),and data for 2024 on data of the fifth round.Sources:Ministry of Health,Labor and Welfare of Japan,Japans Trade Union Confederation(Rengo).1.6.Emerging economies in Asia are expected to maintain a soli

87、d growth trend.Indias economy continues to show solid growth led by favorable domestic demand,while the ASEAN-5 states are achieving robust economic growth owing to foreign tourist arrivals24 and a recovery in the manufacturing sector.25 Going forward,economic growth in Asias emerging countries is e

88、xpected to be driven by buoyant exports and investment as the manufacturing sector,including IT,improves and supply chains are restructured.More recently,however,with inflation showing signs of picking up on the back of rising food prices26 and fading expectations for rate cuts by the Fed,emerging m

89、arket central banks are likely to further delay the timing of their monetary policy pivot.27 In ASEAN-5 states,retail sales remain favorable while manufacturing recovers Indias solid growth is led by domestic demand Inflation shows signs of picking up Figure 1.11.ASEAN-5 real economy indicators1)2)F

90、igure 1.12.Growth in India by expenditure sector Figure 1.13.Consumer price inflation in emerging economies Notes:1)Industrial production(mining and manufacturing)excludes Indonesia.2)Retail sales exclude Philippines.Sources:National statistical offices.Source:Ministry of Statistics and Programme Im

91、plementation of India.Sources:National statistical offices,HAVER.24 Arrivals of foreign visitors(excluding Malaysia,monthly average,10,000 persons):685.8 in 2019 19.2 in 2021 193.2 in 2022 481.9 in 2023 623.6 in Q1 2024 25 ASEAN-5 manufacturing PMI(weighted average):50.8 in Q3 2023 49.8 in Q4 50.8 i

92、n Q1 2024 51.0 in Apr.4 26 Poor harvests due to abnormal climate conditions(El Nio)and rising transport costs associated with intensifying geopolitical conflicts in the Red Sea escalated concerns about food price instability(AMRO,April 2024).27 Bank Indonesia raised the BI-Rate by 25bp to 6.25%to st

93、rengthen rupiah stability(April 24).6 1.7.Global oil prices are expected to remain at higher levels than forecasted in February due to escalated geopolitical tensions,with high uncertainty expected in the future.Global oil prices rose to the low$90s level amid the armed confrontation between Israel

94、and Iran in April and then fell to the low and mid$80s range as tensions eased.Looking ahead,although global oil prices are likely to be somewhat affected by a pickup in seasonal demand,the continued increase in production by non-OPEC+countries is expected to be a downside factor.However,geopolitica

95、l risks and OPEC+s decision whether to extend production cuts will increase price volatility.Meanwhile,natural gas prices,which had been on a downward trend since October 2023,have risen on seasonal demand for restocking and U.S.restrictions on LNG exports in response to climate change,28 but the ma

96、gnitude of the increase is likely to be limited by high inventories.29 Global oil prices fall after sharp rise,while expectations for a rise have receded recently Non-OPEC+states continue to increase crude oil production Natural gas prices have been on the rise since March Figure 1.14.Global oil pri

97、ces and market expectations30 Figure 1.15.Outlook for crude oil production increase by group Figure 1.16.Trend of natural gas prices Source:Bloomberg.Source:EIA.Source:Bloomberg.28 On January 26,2024,the Biden administration announced a“temporary pause”in the approval process for natural gas export

98、permits to countries without a free trade agreement(FTA)with the U.S.For reference,U.S.LNG accounted for 19.4%of Europes natural gas imports,the second highest share after Norway.29 As of May 8,Europes natural gas inventory stood at 63%,the highest level since 2016.30 This refers to the difference i

99、n implied volatility between Brent crude call and put options(risk reversal).The larger it is,the greater the expectations for a price increase.7 Koreas Economy 1.8.In 2024,consolidated fiscal expenditures of central government are projected to increase.Despite the governments continued political st

100、ance of fiscal soundness,fiscal expenditures in 2024 are expected to return to its historical average(7.9%,2015-2019)due to the base effect of last years significant decline in fiscal expenditures.With the substantial increase in consolidated fiscal expenditures and front-loaded fiscal execution in

101、the first quarter,annual expenditures appear to be concentrated in the first half in line with the governments plan for the early implementation of fiscal expenditures.On the other hand,there is a risk of shortfall in tax revenue this year as national tax revenue has been sluggish in the first quart

102、er of 2024 mainly due to corporate tax.31 This year,the ratio of deficit in the managed fiscal balance is projected to be maintained at around the upper 3%,level which is similar to 2023.By 2025,it is forecasted to decline to the upper 2%level in 2025.32 Fiscal expenditures are projected to increase

103、 in 2024 Fiscal execution proceeded rapidly,tax revenue declined Figure 1.17.Consolidated fiscal expenditure1)forecast Figure 1.18.Fiscal execution and national tax revenue in the first quarter1)Note:1)Figures for 2024 are based on original budget,and 2025 on the National Fiscal Management Plan.Sour

104、ce:Ministry of Economy and Finance.Notes:1)Figures in indicate execution rate in Q1.2)Based on front-loaded execution projects managed by the central government.Source:Ministry of Economy and Finance.31 As the operating income of KOSPI-listed companies in 2023 fell by 45%year-on-year,corporate tax r

105、evenue in Q1 2024 was KRW 18.7 trillion,down by KRW 5.5 trillion year-on-year.32 From 2022 to 2025,the ratios of managed fiscal balance and consolidated fiscal balance to GDP are as in the table below.(%of GDP)2022 2023 2024e)2025e)Managed fiscal balance1)-5.4-3.9-3.9-2.9 Consolidated fiscal balance

106、1)-3.0-1.6-1.9-0.9 Note:1)The figures for 2022 and 2023 are based on closing of accounts;for 2024,on the original budget;and for 2025,on the National Fiscal Management Plan.Source:Ministry of Economy and Finance.8 1.9.Housing price33 has declined since the end of last year,although the rate of decli

107、ne has moderated slightly since March this year.Although the downward pressure on housing price has continued amid concerns over non-performing real estate project financing(PF),the volume of housing transactions34 has recently recovered due to favorable real estate development news in some regions,

108、decline in loan interest rates,35 and easing of sluggishness in home purchasing sentiment.36 When viewed by region and type of housing,small apartment buildings townhouses,multiplex housing price in non-metropolitan areas has declined,but in metropolitan areas,especially Seoul,37 rate of decline in

109、apartments complexes price moderated since February this year and remained flat in April.38 Actual transaction-based price index,which had continued to fall in the fourth quarter of last year,showed an overall upward trend in the first quarter of this year.39 Meanwhile,housing lease(aka jeonse)price

110、40 has climbed since August last year,mostly for apartments complexes,due to the decline in supply of apartments complexes listings for jeonse.41 Housing price declines have slightly moderated recently Housing jeonse price has continued to rise since the second half of last year Figure 1.19.Housing

111、price1)Figure 1.20.Housing jeonse price by housing type Note:1)Actual transaction-based price index in Apr.2024 is tentative.Source:Korea Real Estate Board.Source:Korea Real Estate Board.33 Based on the housing price index of the Korea Real Estate Board.34 Housing transactions nationwide(based on da

112、te reported,10 thousand):Dec.2023 3.80 Jan.2024 4.30 Feb.4.35 Mar.5.28 35 Home mortgage loan interest rates(based on new transactions,%):Nov.2023 4.48 Dec.4.16 Jan.2024 3.99 Feb.3.96 Mar.3.94 36 Housing purchase supply/demand index(Korea Real Estate Board,demand dominance when more than 100):Dec.202

113、3 87.9 Jan.2024 87.7 Feb.87.6 Mar.88.3 Apr.89.4 37 Apartments(complexes)price index in Seoul(Korea Real Estate Board,MoM,%):Jan.2024-0.17 Feb.-0.14 Mar.-0.02 Apr.0.13 38 Apartments(complexes)price index in metropolitan area(Korea Real Estate Board,MoM,%):Jan.2024-0.24 Feb.-0.21 Mar.-0.15 Apr.0.00 Sm

114、all apartment buildings price index in non-metropolitan area(Korea Real Estate Board,MoM,%):Jan.2024-0.07 Feb.-0.09 Mar.-0.10 Apr.-0.09 39 Actual transaction-based price index(Korea Real Estate Board,MoM,%):Jan.2024 0.38 Feb.-0.02 Mar.0.29 40 Based on the housing jeonse price index of the Korea Real

115、 Estate Board 41 Supply of apartments(complexes)listings for jeonse nationwide(10 thousand,end of month):Mar.2023 17.5 Jun.13.7 Sep.11.9 Dec.13.9 Mar.2024 13.1 Apr.12.5 9 1.10.There is a high degree of uncertainty about a future housing price trend.Amid a gradual improvement in expectation for housi

116、ng price appreciation,the possibility of a gradual easing of financial conditions42 and the special loans for newborns are potential upside factors for housing price.On the other hand,ongoing real estate project financing(PF)risks,a significant number of housing listings for sale,43 and an increase

117、in unsold housing are putting downward pressure on housing price.Number of unsold housing has increased since the end of last year Expectation for housing price appreciation is improving,and sluggishness in home purchasing sentiment is easing slightly Figure 1.21.Unsold housing and unsold housing af

118、ter completion Figure 1.22.Expectations of housing prices CSI1)and housing purchase supply/demand index2)Source:Ministry of Land,Infrastructure and Transport.Notes:1)Expectations for housing price depreciation dominance when less than 100.2)Supply dominance when less than 100.Sources:Bank of Korea,K

119、orea Real Estate Board.1.11.The growth rate of nominal wages44 is expected to rise slightly this year,due to an increase in special payments.In January and February of 2024,special payments in the manufacturing sector and in enterprises with more than 300 employees fell significantly,45 bringing dow

120、n the growth rate of nominal wages.However,the nominal wage growth rate is expected to rise gradually as regular wages,which are an indicator of underlying wage trends,rise at their long-term average and special payments also improve in line with improved business performance.42 With degree of globa

121、l monetary tightening expected to ease toward the end of the year,interest rates for housing loans are generally on a downward trend.However,uncertainty about the timing and number of U.S.policy rate cuts has increased recently.COFIX interest rates(based on new transactions and publication date,%):D

122、ec.2023 4.00 Jan.2024 3.84 Feb.3.66 Mar.3.62 Apr.3.59 May.3.54 Interest rates for bank bonds(5-year,AAA,monthly average,%):Dec.2023 3.92 Jan.2024 3.84 Feb.3.89 Mar.3.82 Apr.3.87 May.3.81(based on May 1 to 22)43 In May 2024(based on May 22),supply of apartments(complexes)listings for sale nationwide

123、reached 562 thousand units,well above the historical average(January 6,2020,to December 31,2023,369 thousand units).Supply of apartments(complexes)listings for sale nationwide(10 thousand units,end of month):Feb.2024 54.5 Mar.54.8 Apr.54.9 in April May.56.2(based on May 22)44 (YoY growth rate,%)Q2 2

124、023 Q3 Q4 Jan-Feb 2024 Nominal wages 2.9 2.7 2.5 0.5(Permanent employees regular payments)3.8 3.6 3.4 3.5(Permanent employees special payments)-2.4-0.6-3.4-12.5 Real wages-0.4-0.4-0.9-2.4 45 In January and February 2024,permanent employees special payments in the manufacturing sector and in enterpri

125、ses with more than 300 employees fell by 27.8%and 21.9%,respectively,year-on-year.10 Nominal wage growth slows,expected to rebound this year Permanent employees regular payments continue to rise at the long-term average Figure 1.23.Nominal wage growth per employee Figure 1.24.Growth of permanent emp

126、loyees regular payments Note:1)Average of January and February.Source:Ministry of Employment and Labor.Note:1)Average of January and February.Source:Ministry of Employment and Labor.1.12.Market interest rates rose as expectations for rate cuts by the U.S.Federal Reserve weakened after the February f

127、orecast and have recently receded.As U.S economic indicators such as CPI(April 10)and employment(April 5)were higher than market expectations,U.S.Treasury bond yields(10-year)rose in April.46 In May,however,U.S.Treasury bond yields fell as the results of the FOMC meeting on May 1 were accommodative4

128、7 and the U.S.employment data announced on May 3 was below market expectations.48 Similarly,domestic long-term interest rates rose sharply in April and fell in May.The KRW/USD exchange rate rose to KRW 1,400 in trading on April 16,due to weakening expectations for Fed rate cuts and Middle East risks

129、,and declined to KRW 1,363 on May 22 due to efforts by the foreign exchange authorities to stabilize the markets and a partial recovery of expectations for Fed rate cuts.Expectations for a rate cut by the U.S.Federal Reserve weaken Long-term interest rates have recently begun to fall KRW/USD exchang

130、e rate is fluctuating at a high level Figure 1.25.Projections for U.S.policy rates1)Figure 1.26.Korean and U.S.Treasury bond yields Figure 1.27.KRW/USD exchange rate and U.S.Dollar Index Note:1)Expected policy rate(upper bound)embedded in Fed funds rate futures.Source:CME Fed Watch.Sources:Bank of K

131、orea,Bloomberg.Sources:Bank of Korea,Bloomberg.46 This is due to U.S.March inflation rate based on CPI(3.5%vs.consensus of 3.4%)and non-farm payrolls(303,000 vs.consensus of 214,000)coming in above of market projections as well as a series of hawkish comments from key Federal Reserve officials,inclu

132、ding Chairman Powell.47 Chairman Powell said at the May 1 FOMC meeting that the current policy stance is sufficiently restrictive,making further rate hikes unlikely.Markets interpreted his comments as a continuation of the Feds accommodative stance.48 U.S.non-farm payrolls rose by 175,000 in April,b

133、elow the consensus estimate of 243,000.11 1.13.Corporate loans have been growing at a faster pace since February,and household loans,which had decreased recently,shifted to a significant increase in April.Corporate loans accelerated,reflecting banks efforts to expand corporate lending and the growin

134、g corporate demand for funding.Household loans declined in the first quarter due to a decrease in demand for home mortgage loans49 and tighter risk management in the non-bank sector and rose sharply in April as a result of an increase in housing transactions and expansion in the supply of policy loa

135、ns based on bank funds.Meanwhile,the delinquency rates for corporate loans and household loans have been rising since the second half of 2022.In particular,the delinquency rate for corporate loans issued by the non-bank sector is rising rapidly,especially for PF loans.Corporate loans by financial in

136、stitutions accelerate Household loans by financial institutions increase after declining Delinquency rates for corporate loans by non-bank sector increase rapidly Figure 1.28.Change in corporate loans1)by financial institutions2)Figure 1.29.Change in household loans by financial institutions1)Figure

137、 1.30.Delinquency rates for household and corporate loans Notes:1)Including loans for financial companies.2)Deposit-taking banks+non-bank financial institutions.3)Excluding loans issued by non-bank financial institutions after March.Source:Bank of Korea.Note:1)Deposit-taking banks+non-bank financial

138、 institutions.Source:Bank of Korea.Source:Bank of Korea.49 The volume of jeonse transactions in February(108,000)and March(102,000)of 2024 was 10.6%and 14.2%lower,respectively,than the average for the last five years(2019-2023),contributing to lower demand for home mortgage loans.12 Main Premises of

139、 the Baseline Outlook Global economic growth rate(%):3.2 in 2023 3.1 in 2024(up 0.1)3.1 in 2025(unchanged)Overall,the global economy is on track for a soft landing.It is expected to continue growing at a moderate pace,although the timing of monetary easing in some countries,including the United Stat

140、es,may be somewhat delayed.The United States is forecast to continue its favorable growth,supported by solid employment and rising consumption.The euro area is likely to improve moderately from the second half of the year,driven mainly by consumption,and gradually emerge from its sluggishness.China

141、is expected to maintain a growth rate in the high 4%range,supported by an improvement in exports and implementation of government policy to stimulate the economy.Global trade growth(%):0.3 in 2023 3.1(down 0.1)in 2024 3.5(down 0.1)in 2025 Although global trade will likely recover modestly,mostly in

142、goods trade,thanks to an improvement in the global manufacturing sector,growth has been revised slightly downward as this improvement has been slower than expected.Global oil prices(Brent crude,USD/barrel):82 in 2023 85(up 2)in 2024 81 in 2025(unchanged)With global oil prices rising to the mid-$80s

143、amid the Israel-Iran conflict,the forecast for this year has been revised upwards.Global oil prices are expected to come under downward pressure from 2025 onwards,after fluctuating around the$80s.2023 2024e)2025e)Year H1 H2 Year 3)H1 H2 Year 3)Global economic growth(%)1)3.2 3.1 3.0 3.1+0.1 3.1 3.1 3

144、.1 -United States 2.5 3.0 2.0 2.5+0.5 1.7 1.8 1.8+0.1 Euro area 0.4 0.4 1.2 0.8+0.1 1.5 1.5 1.5-0.2 China 5.2 4.8 4.5 4.7+0.1 4.3 4.5 4.4-0.1 Japan 1.9 -0.1 1.6 0.8-0.1 1.6 0.3 0.9 -Global trade growth(%)1)0.3 2.1 4.1 3.1-0.1 3.9 3.3 3.5-0.1 Global Brent crude prices(USD/barrel)2)82 85 85 85+2 81 80

145、 81 -Notes:1)Year-on-year.2)Period average.3)Figures in indicate change from assumption made in February 2024.Sources:statistics offices in each area,Bloomberg,Bank of Korea.13 2.Macroeconomic Outlook for Korea Economic Growth 2.1.The Koreas economy is expected to grow at a much faster pace than for

146、ecast in February as the export-led recovery takes hold.Contrary to initial concerns,domestic demand has developed favorably and is expected to recover in the second half of the year.In the first quarter,the increase in exports has spread to both the non-IT and IT sectors,with the spillover to domes

147、tic demand occurring gradually.In addition,temporary factors such as mild weather have also contributed to the recovery in domestic demand,leading to a growth rate of 1.3%,well above the previous forecast.Looking ahead,exports,fueled by the growing demand for AI and a recovery in the global manufact

148、uring sector,are likely to help improve the overall economy.Nevertheless,growth in the second quarter is expected to be revised downward as the temporary factors influencing domestic demand in the first quarter fade.Domestic demand,such as consumption,is likely to recover gradually in the second hal

149、f of the year as household income conditions improve amid slowing inflation and rising corporate profits.As a result,growth for this year is projected to reach 2.5%,up 0.4%p from the previous forecast of 2.1%.In 2025,growth is forecast to be 2.1%,slightly lower than the initial forecast of 2.3%,part

150、ly due to the base effect of this years upward revision to growth.Domestic growth is improving,led by exports,and balanced growth between exports and domestic demand is expected from the second half of the year Both internal and external factors induced upward revision to 2024 growth projection Figu

151、re 2.1.Contribution by expenditure sector Figure 2.2.Contribution of domestic demand and exports to net growth1)Figure 2.3.Adjustment factors for 2024 growth projection1)2)Source:Bank of Korea.Note:1)Estimated by excluding impact on imports.Source:Bank of Korea.Notes:1)External factors:external dema

152、nd expansion.2)Internal factors:temporary factors in Q1 2024,etc.Source:Bank of Korea.14 2.2.By sector,private consumption,which recorded strong growth at the beginning of this year,is expected to slow down moderately in the second quarter and then recover gradually in the second half of the year th

153、anks to the improvement in real household income.In the first quarter,private consumption rose significantly,mainly for clothing(semi-durable goods),motor fuel(non-durable goods),and telecommunication devices(durable goods),supported by favorable weather and the early launch of new mobile phone mode

154、ls.Looking ahead,private consumption is expected to grow at a slower pace as temporary factors fade and then continue to recover gradually.The growth rate of private consumption is projected to reach 1.8%this year,higher than the February forecast of 1.6%(with the average over the last 10 years bein

155、g 2.0%),and rise to 2.3%in 2025.Consumption of goods improved in the first quarter due to favorable weather conditions Household income is expected to improve gradually Figure 2.4.Retail sales by product Figure 2.5.Real household labor income1)and households perception of the economic situation2)Sou

156、rce:Statistics Korea.Notes:1)Nominal wage number of employees/consumer price index.2)The first half of 2024 is January to May 2024.Sources:Statistics Korea,Bank of Korea.2.3.Facilities investment is expected to increase due to an upturn in the IT cycle.In the first quarter,despite an increase in inv

157、estments to meet the growing demand for AI,facilities investment decreased compared to the previous quarter due to delays in aircraft deliveries caused by supply disruptions.Going forward,investment is expected to resume its favorable trend with rising investment particularly in high performance sem

158、iconductor processes amid a boom in the IT sector as well as in ships and aircraft in line with an improvement in trade and recovery of travel demand.However,a possible delay in the recovery of facilities investment for general-purpose chips is a potential risk.In summary,facilities investment is ex

159、pected to grow by 3.5%this year and by 3.9%next year.15 Facilities investment decreased in the first quarter due to delays in aircraft deliveries Facilities investment is expected to increase due to an upturn in the IT cycle Figure 2.6.GDP facilities investment Figure 2.7.Global memory chip sales an

160、d PHLX Semiconductor Index Note:1)Based on real GDP(seasonally adjusted).Source:Bank of Korea.Note:1)2024 is based on the average from January 1 to May 9.Sources:Gartner,Nasdaq.2.4.Investment in intellectual property products(IPP)is expected to recover gradually,driven by improved corporate performa

161、nce.In the first quarter,investment in IPP shifted strongly upward as the investment capacity of major companies increased due to improved performance and efforts to ensure technological competitiveness continued in new growth areas such as AI.Looking ahead,IPP investment is expected to continue inc

162、reasing as corporate R&D expands on the back of favorable corporate profits and the demand for AI-related software increases.As a result,IPP investment is forecast to grow by 2.4%this year and 3.3%next year.IPP investment shifted to a significant increase in the first quarter IPP investment is expec

163、ted to gradually recover as corporate profits improve Figure 2.8.GDP IPP investment Figure 2.9.IPP investment and sales from manufacturing1)Note:1)Based on real GDP(seasonally adjusted).Source:Bank of Korea.Note:1)Manufacturing sales after first quarter of 2024 are based on market projection.Sources

164、:Bank of Korea,FnGuide.16 2.5.Construction investment is expected to be sluggish as the effects of the contraction in new construction starts to date become apparent.In the first quarter,there was a temporary surge in construction investment as large-scale construction projects progressed rapidly un

165、der favorable weather conditions,despite a slump in various leading indices such as new construction starts and orders.However,going forward,construction investment is forecast to be sluggish as the volume of construction declines due to a reduction in the supply of new construction,especially in th

166、e residential and commercial sectors,50 and continued slump in new construction starts.The possibility of factory expansion driven by the boom in the IT business and uncertainty related to real estate PF restructuring are upside and downside risks,respectively.Taking these factors into account,const

167、ruction investment is forecast to decline 2.0%this year and 1.1%next year.Construction investment is up sharply in Q1 as major projects progress rapidly Construction investment will fall again due to declining construction starts and orders Figure 2.10.GDP construction investment Figure 2.11.New con

168、struction starts and construction orders Note:1)Based on real GDP(seasonally adjusted).Source:Bank of Korea.Sources:Ministry of Land,Infrastructure and Transport,Statistics Korea.2.6.Exports of goods(based on real GDP,quarter-on-quarter)are expected to improve more than initially projected,driven by

169、 a robust recovery in the IT sector and strong growth of the U.S.economy.Exports rose sharply in the first quarter,mainly in high-performance semiconductors and wireless communication devices,and are projected to continue to recover on the back of the increasing penetration of AI technology,51 solid

170、 U.S.import demand,and Chinas economic stimulus measures.As a result,exports are projected to increase by 5.1%this year and by 3.0%next year.Meanwhile,goods imports(based on real GDP,quarter-on-quarter),which declined in the first quarter,are expected to grow by 2.4%and 3.1%this year and next year,r

171、espectively,as demand for energy and capital goods increases amid favorable exports and recovering facilities investment.50 New apartment supply(10,000 units):10.5 in Q4 2023 10.9 in Q1 2024 7.6 in Q2e)7.6 in Q3e)51 According to market research firm Canalys,global sales of Samsung Electronics Galaxy

172、 S24 equipped with on-device AI capabilities(13.5 million units)jumped 35%year-on-year in Q1 2024 compared to the Galaxy S23 series(10 million units).17 IT exports are showing solid growth,and non-IT exports are expected to improve gradually Semiconductor exports are expected to continue strong grow

173、th,especially for high performance semiconductors Goods imports are to increase from the second half of this year Figure 2.12.IT and non-IT exports1)Figure 2.13.Change in sales forecasts of Koreas semiconductor companies1)by major institutions Figure 2.14.Crude oil and capital goods imports1)and goo

174、ds imports2)Note:1)Figures in indicate shares of exports in 2023.Source:Korea Customs Service.Notes:1)Samsung Electronics and SK Hynix.2)Dotted line indicates forecast in January 2024.Sources:Korea Customs Service,reports of securities firms and investment banks.Notes:1)On a customs clearance basis.

175、2)Based on real GDP.Source:Korea Customs Service.Economic Growth Outlook (YoY,%)2023 2024e)2025e)Year H1 H2 Year H1 H2 Year GDP growth rate 1.4 2.9 2.2 2.5 1.8 2.5 2.1 Private consumption 1.8 1.4 2.2 1.8 2.4 2.3 2.3 Facilities investment 0.5 1.2 5.7 3.5 5.8 2.1 3.9 IPP investment 1.6 2.2 2.6 2.4 2.6

176、 3.9 3.3 Construction investment 1.3 -1.1-2.7-2.0 -2.7 0.3-1.1 Goods exports 3.1 7.0 3.4 5.1 2.5 3.6 3.0 Goods imports-0.6 -0.8 5.6 2.4 5.1 1.2 3.1 Source:Bank of Korea.18 Current Account 2.7.On a customs clearance basis(by nominal value,year-on-year),exports of IT products are expected to maintain

177、a high level of growth,and exports of non-IT products are also expected to gradually improve.Among IT products,semiconductors for AI servers52 and SSDs53 are expected to sustain high growth,and displays54 and wireless communication devices55 are also likely to grow favorably due to the introduction

178、of AI-enabled mobile and PC products.Among non-IT products,machinery and petroleum products are expected to continue their recovery,and steel products are likely to gradually improve due to strong growth in the U.S.and economic stimulus measures in China.However,the growth of automobiles will likely

179、 moderate slightly due to increasing competition in the electric vehicle market.56 Regionally,exports to the U.S.will maintain their strong growth,and exports to China and ASEAN-5 are expected to improve,especially for intermediate goods such as semiconductors and mobile phone components.On a custom

180、s clearance basis(by nominal value,year-on-year),imports are expected to gradually increase,reversing their downward trend.Imports decreased by 11.1%in the first quarter,but imports of raw materials,capital goods,and consumer goods all turned positive in April.Looking ahead,energy imports are expect

181、ed to increase gradually due to growing industrial and power generation demand57,58 driven by export growth.Imports of capital goods,especially electronic equipment,59 are forecast to increase,and imports of consumer goods are expected to rise gradually with domestic demand recovery.Exports continue

182、 to expand,driven by IT products Imports of raw materials,capital goods,and consumer goods all turned positive in April Figure 2.15.Contribution to exports by item on a customs clearance basis Figure 2.16.Contribution to imports by item on a customs clearance basis Source:Korea Customs Service.Sourc

183、e:Korea Customs Service.52 During January to April 2024,memory chip exports increased by 86.7%year-on-year,and market research firm TrendForce(May 2024)forecasts that the share of HBM(High Bandwidth Memory)in DRAM revenue will rise from 8%in 2023 to 21%in 2024.53 Enterprises are increasingly looking

184、 to deploy on-premise servers rather than rely on cloud-based servers for technology security and optimization,leading to a surge in exports of high-capacity enterprise SSDs(eSSDs).54 During January to April 2024,exports of displays increased by 13.3%year-on-year driven by the increasing adoption of

185、 OLEDs for IT products(medium-sized displays used for tablets and notebook PCs)and favorable demand for high-end LCD panels.55 Exports of smartphones rebounded by 6.5%year-on-year in Q1 2024,and exports of smartphone parts were sluggish in Q1(-19.8%)but surged by 38.3%in April,showing signs of recov

186、ery.56 Growth of vehicle exports slowed noticeably in Q1 2024(YoY,+1.6%)due to production line maintenance by some companies and the growth rate expanded in April.However,exports of electric vehicles continue to decline(-6.3%in Q1 2024 -8.5%in April).57 In the global market for petroleum products,ex

187、cess demand is expected to rise sharply in the second quarter and turn into a moderate excess supply in the fourth quarter(EIA,April 2024).58 Natural gas imports show a very high correlation(0.86,based on data from 2010 to 2023)with our exports.In April 2024,natural gas imports increased by 37%(year

188、-on-year)driven by increased demand for power generation and industrial use.59 The correlation between semiconductor exports,which are influenced by IT business conditions,and electronic equipment imports(semiconductors,computers,etc.)is 0.75(2010-2023).19 2.8.The current account surplus is expected

189、 to widen more than initially projected.The current account recorded a larger-than-expected surplus of$16.8 billion in the first quarter,driven by the goods account,as exports rose on the back of the strong IT sector and robust U.S.growth,while imports fell.The goods account is expected to maintain

190、a large surplus due to the penetration of AI technology and increased import demand from major countries.The services account will likely remain in deficit,mainly in travel and transportation,but the rapid recovery of foreign tourist arrivals will help mitigate the deficit.As a result,the current ac

191、count surplus is projected to reach$60 billion this year and$61 billion next year.Surplus is expected to widen,led by goods account Inbound tourism rebounds,led by Chinese visitors Figure 2.17.Current account1)Table 2.1.Trend of inbound arrivals1)(10,000 persons)2023 2024 Q4 Q1 Jan.Feb.Mar.Apr.Outbo

192、und 652 742 277 251 214 199 (99.0)(94.4)(95.1)(96.0)(91.8)(88.4)Inbound 338 340 88 103 149 141 (74.0)(88.6)(79.7)(85.7)(97.1)(86.5)Chinese 72 102 28 34 39 39 (45.8)(76.1)(71.3)(75.8)(80.3)(78.9)Note:1)Monthly averages during relevant periods.Sources:Korea Customs Service,Bank of Korea.Note:1)Numbers

193、 in()indicates the percentage(%)compared to 2019.Source:Korea Tourism Organization.Current Account Outlook(hundred million dollars)2023 2024e)2025e)Year H1 H2 Year H1 H2 Year dCurrent Account 355 279 321 600 280 331 610 Goods 341 360 347 707 401 396 796 Exports(value)1)6,322 3,340 3,582 6,922 3,588

194、3,724 7,312 (-7.5)(8.8)(10.1)(9.5)(7.4)(3.9)(5.6)Imports(value)1)6,426 3,180 3,402 6,582 3,430 3,512 6,942 (-12.1)(-4.6)(10.0)(2.4)(7.9)(3.2)(5.5)Services-257 -123-125-248 -154-162-316 Primary and Secondary income 271 42 99 141 33 97 130 Note:1)Figures in()indicate YoY growth rates.Sources:Bank of K

195、orea,Korea Customs Service.20 Prices 2.9.Headline inflation(CPI)in April fell to below 3%,as core inflation continued to decelerate and the upward trend of agricultural,livestock,and marine products prices moderated.60 Core inflation(excluding food and energy)fell to 2.3%as the deceleration continue

196、d,particularly in personal services.The rise in prices of agricultural,livestock,and marine products also moderated,as prices of agricultural products fell slightly,although they remained high,and price increase of livestock products slowed.61 Prices of petroleum products rose at a faster pace than

197、in the previous month,reflecting the impact of rising global oil prices.62 Meanwhile,cost-of-living index inflation63 rose at a slightly slower pace,reflecting changes in the prices of agricultural,livestock,and marine products.Headline inflation has fallen to below 3%recently Figure 2.18.Headline a

198、nd core inflation Figure 2.19.Decomposition of difference in monthly increases1)Source:Statistics Korea.Note:1)Difference in contribution to headline inflation.Sources:Statistics Korea,Bank of Korea.2.10.Households inflation expectations(for the next 12 months)fluctuated around the low 3%level.64 Lo

199、ng-term inflation expectations(five years ahead,Consensus Economics)among professionals remained stable around the target level(2%).60 YoY(%):Headline inflation Feb.2024 3.1%Mar.3.1%Apr.2.9%Core inflation 2.5%2.4%2.3%61 YoY(%):Prices of agricultural,livestock,and marine products Feb.2024 11.4%Mar.11

200、.7%Apr.10.6%Prices of agricultural products 20.9%20.5%20.3%Prices of livestock 1.1%2.1%0.3%62 Global oil prices fluctuated around USD 90(Dubai Crude)in April as unrest escalated in the Middle East.However,as tensions eased in May,oil prices hovered in the mid USD 80s.63 The cost-of-living index is b

201、ased on 144 items that are purchased frequently and account for a large proportion of consumer spending,in CPI.YoY(%):Cost-of-living Feb.2023 37%Mar.3.8%Apr.3.5%64 (%)Jul.2023 Aug.Sep.Oct.Nov.Dec.Jan.2024 Feb.Mar.Apr.May BOK households(next 12 months)3.3 3.3 3.3 3.4 3.4 3.2 3.0 3.0 3.2 3.1 3.2 Conse

202、nsus Economics professionals(5 years ahead)2.0 2.0 2.0 2.0 2.0 2.0 1.9 1.9 1.9 1.8 1.8 21 Core inflation continues to decelerate,and the upward trend of agricultural,livestock,and marine products prices have been moderated recently Figure 2.20.Contribution to headline CPI inflation Figure 2.21.Contr

203、ibution to core inflation Note:1)Excluding core items.Sources:Statistics Korea,Bank of Korea.Sources:Statistics Korea,Bank of Korea.2.11.Although upward pressure on inflation has increased,it is not significant enough to adjust the February forecast(headline inflation 2.6%,core inflation 2.2%).With

204、domestic growth expected to exceed initial projections,inflation is likely to be slightly above the previous forecast after the second quarter as supply-side pressures,such as oil prices and exchange rates,increased.65 However,as core inflation remains subdued amid the current restrictive monetary p

205、olicy and the governments price stability measures66 limit upward pressures,annual inflation is expected to reach a level similar to that of February forecast.Next year,headline inflation and core inflation are projected to be 2.1%and 2.0%,respectively,in line with the previous forecast,as the upwar

206、d trends of oil and agricultural product prices abate and cost-increase pressures ease.Looking ahead,inflation may be slightly above the previous forecast path,but it is likely to be in line with the previous forecast on an annual basis Figure 2.22.Headline inflation outlook Figure 2.23.Core inflati

207、on outlook Note:1)Projection for 2025 is on an annual basis.Sources:Statistics Korea,Bank of Korea.Note:1)Projection for 2025 is on an annual basis.Sources:Statistics Korea,Bank of Korea.65 For the second half of this year,headline inflation(February forecast 2.3%May forecast 2.4%)and core inflation

208、(2.0%2.1%)were each revised up by 0.1%p from the February forecast.66 In the first half of the year,the government maintained its policy of freezing public prices,extended the oil tax cut for another two months(end April end June),and strengthened measures to stabilize agricultural product prices.22

209、 2.12.Going forward,headline inflation is likely to be around the upper 2%range for the time being and fall below 2.5%in the second half of the year.In the short term,headline inflation may not move smoothly with movements of global oil67 and agricultural product prices;however,in the second half of

210、 the year,it will likely fall below 2.5%due to the base effect of last years sharp increases in prices of oil and agricultural products.Recent rise in petroleum product prices eases slightly Sharp rise in agricultural product prices moderates slightly,led by fruit Global oil prices are expected to h

211、over around USD 80 Figure 2.24.Gasoline and diesel prices Figure 2.25.Agricultural product prices Figure 2.26.Global oil prices1)2)Source:Opinet.Source:Statistics Korea.Notes:1)Brent crude.2)Dotted line is projections.Shaded area indicates the range of projections made by three organizations(EIA,IHS

212、,and OEF)and 32 institutions,in Bloomberg.Sources:Bank of Korea,each organization.Inflation Outlook(YoY,%)2023 2024e)2025e)Year H1 H2 Year H1 H2 Year Headline inflation 3.6 2.9 2.4 2.6 2.2 2.1 2.1 Core prices1)3.4 2.4 2.1 2.2 2.1 2.0 2.0 Note:1)Excluding foods and energy.Sources:Bank of Korea,Statis

213、tics Korea.67 (Average over time)Apr.2023 Nov.Dec.Jan.2024 Feb.Mar.Apr.May.122 Dubai(USD/barrel)83.8 83.5 77.2 78.9 81.2 84.7 89.4 83.7 Gasoline(KRW/liter)1,640.9 1,684.1 1,600.6 1,569.2 1,614.5 1,639.1 1,687.8 1,704.7 Diesel(KRW/liter)1,535.7 1,628.2 1,526.3 1,480.1 1,517.8 1,539.0 1,557.8 1,550.1

214、23 Employment 2.13.The number of employed persons is expected to increase by 260,000,generally in line with the previous forecast of 250,000.Looking at the year-on-year growth in employment by sector,the number of employed persons continued to rise in the first quarter of this year as growth in the

215、manufacturing sector turned positive while it slowed in the services sector due to a decline in contact-intensive services such as retail and wholesale trade.In April,employment in the manufacturing sector also increased at a faster pace,continuing to show solid growth.Looking ahead,the labor supply

216、 from women and the elderly is expected to continue to increase,but as growth in the services sector moderates,especially in contact-intensive services,employment growth is expected to slow gradually.Meanwhile,the unemployment rate is projected to reach 2.9%in both 2024 and 2025,while the employment

217、 rate is expected to be 62.8%and 63.0%,respectively.Employment continues to record solid growth Unemployment rate1)hovers below 3%,remaining low Figure 2.27.Change in number of employed persons Figure 2.28.Unemployment and employment rates Source:Statistics Korea.Note:1)The unemployment rate rose sh

218、arply in December 2023 as more people became unemployed following the end of the governments employment support program for older people.Source:Statistics Korea.Employment increased mainly among women and older people Employment in contact-intensive services remains sluggish Figure 2.29.Employment g

219、rowth by gender and age group1)Figure 2.30.Number of employed persons by sector Note:1)As of first quarter of 2024.Source:Statistics Korea.Note:1)Hospitality,wholesale and retail,education,arts,sports and leisure,personal services,etc.Source:Statistics Korea.24 2.14.Meanwhile,labor market tightness

220、remained unchanged in the first quarter compared with the previous quarter.In the first quarter of this year,the job openings rate was at a level similar to that of the previous quarter,as it rose in contact-intensive services and fell in manufacturing and non-contact-intensive services.The unemploy

221、ment rate was in the mid-to-high 2%range.Labor market tightness remains unchanged from the previous quarter Figure 2.31.Job openings rate by sector Figure 2.32.Beveridge curve1)Source:Ministry of Employment and Labor.Note:1)Blue dots represent the pre-pandemic period while red dots represent the pos

222、t-pandemic period.Sources:Statistics Korea,Ministry of Employment and Labor,Bank of Korea.Employment Outlook(10,000 persons,%)2023 2024e)2025e)Year H1 H2 Year H1 H2 Year Employment change1)33 27 24 26 22 15 18 Unemployment rate 2.7 3.0 2.7 2.9 3.1 2.7 2.9(S.A.)-2.8 3.0-2.9 3.0-Employment rate2)62.6

223、62.5 63.1 62.8 62.8 63.2 63.0 69.2 69.4 70.0 69.7 70.2 70.6 70.4 Notes:1)Year-on-year.2)Aged 15 or older,numbers in square brackets are for ages 15-64(OECD).Sources:Bank of Korea,Statistics Korea.25 3.Risk Assessment Key Risks to the Outlook 3.1.There is a high degree of uncertainty about the path o

224、f projection,related to GDP growth,inflation trends,and monetary policies in major countries,the pace of expansion in IT industry,global oil prices and exchange rate movements.For prices,the degree of diffusion of price hikes by companies and the timing of adjustment in utility rates are potential r

225、isk factors.68 Upside risks Downside risks GDP Growth Stronger recovery of the global IT sector,such as expansion of investment in AI Prolongation of the global monetary policy tightening Continued strong growth of the U.S.economy Increasing negative impact of real estate PF restructuring Stronger m

226、omentum of private consumption recovery Global asset price correction Inflation Increasing geopolitical unrest and rising global oil prices Weakening demand pressures at home and abroad Rising agricultural product prices due to supply disruptions Declining global oil prices Spread of price increases

227、 by firms Government action to stabilize prices Distribution of Growth Projections by Major Institutions 3.2.Looking at the distribution of growth projections for 2024 by main forecasting institutions,the downside risks have diminished slightly compared to the February forecast.The median,upper 25%a

228、nd lower 25%(2.5%,2.6%,and 2.3%respectively)value of GDP growth projections for 2024 were 0.3%p higher than in the February forecast,showing that the overall distribution has been shifting upward.Figure 3.1.Distribution of domestic growth projections for 2024 by major institutions1)Note:1)35 to 39 i

229、nstitutions,including investment banks.Source:Bloomberg survey(May 9).68 Firms price increases have been limited to a few items,so their impact on inflation is not judged to be significant.However,the possibility of such price increases spilling over to other items needs to be taken into accounts.26

230、 Scenario Analysis 3.3.Given the high level of uncertainty around the projection,we analyze two alternative scenarios:one related to geopolitical conflicts(Scenario 1)and the other to the global monetary policy stance(Scenario 2).Scenario 1 Global geopolitical conflict:Faster-than-expected easing(op

231、timistic)vs.Deepening(pessimistic)Considering the high degree of uncertainty about the development of geopolitical conflicts,such as those in the Middle East,both optimistic and pessimistic scenarios were developed for the scenario analysis.69 Scenario 1(optimistic):If a ceasefire deal is reached be

232、tween Israel and Hamas,and the Russia-Ukraine conflict abates,negative supply shocks will be mitigated,leading to a 0.1%p increase in growth and a 0.1%p decrease in inflation this year compared to the baseline forecast.Scenario 1(pessimistic):If the conflict in the Middle East intensifies and the Ru

233、ssia-Ukraine war escalates,growth is estimated to decline by 0.2%p,and inflation to increase by 0.3%p this year due to higher prices of key commodities and deteriorating financial conditions.Scenario 2 Prolonged global tightening In the case of prolonged global tightening,global trade and growth wil

234、l slow down and Koreas economic growth is expected to fall by 0.1%p this year.Inflation is projected to remain broadly in line with the baseline forecast,reflecting the mixed effects of exchange rate depreciation and domestic slowdown due to prolonged tightening.Figure 3.2.Geopolitical risk index1)F

235、igure 3.3.Market expectations regarding timing of pivot in major countries1)Note:1)May 2024 is for May 1 to 6.Source:Caldara,D.and Iacoviello,M.(2022).Note:1)Based on market expectations embedded in OIS,FFR futures,and etc.Source:Bloomberg.69 The optimistic scenario assumes that the geopolitical ris

236、k(GPR)index will fall from its current level(117,May 2024)to the level seen before the Russia-Ukraine war(94,2010-2021),while the pessimistic scenario assumes that the index will rise to the level reached when Hamas attacked Israel in October 2023(206).27 Table 3.1.Major premises by scenario Main pr

237、emises of baseline outlook Baseline Scenario 1(optimistic)Scenario 1(pessimistic)Scenario 2 2024e)2025e)2024e)2025e)2024e)2025e)2024e)2025e)Global oil prices(Dubai crude)$84$79$82$74$92$90-U.S.policy rate1)(upper bound of Federal Funds Rate)Present End of 2024e)End of 2025e)-Present End of 2024e)End

238、 of 2025e)5.50%5.00%4.00%5.50%5.50%4.75%2)Euro policy rate1)(Deposit Facility Rate)4.00%3.25%2.50%-4.00%3.75%3.25%2)Notes:1)Set by the Research Department in reference to the IMF World Economic Outlook(April 2024)(May 13).2)Upper bound of projections of major investment banks(May 13).Sources:Bank of

239、 Korea,Bloomberg,IMF.GDP growth rate Headline inflation(YoY,%)2023 2024e)2025e)Baseline 1.4 2.5 2.1 Scenario 1(optimistic)+0.1+0.3 Scenario 1(pessimistic)-0.2-0.5 Scenario 2 -0.1-0.2 (YoY,%)2023 2024e)2025e)Baseline 3.6 2.6 2.1 Scenario 1(optimistic)-0.1-0.1 Scenario 1(pessimistic)+0.3+0.2 Scenario

240、2 -0.1 Source:Bank of Korea.28 BOX 1 Assessment of Recent G2 Economic Situations and Implications Favorable Growth Trend of G2 Economies and Key Characteristics This year,the United States and China are experiencing favorable growth,increasing the possibility of a soft landing for the global economy

241、.Looking at the two countries growth in the first quarter,the U.S.,which had seen remarkable growth despite high interest rates,grew at an annual rate of 1.6%quarter on quarter,slightly below expectations.However,amid buoyant employment,70 consumption is solid,and equipment investment has turned pos

242、itive,suggesting that domestic demand-led growth momentum has persisted.The Chinas economy rebounded with a growth rate of 5.3%year on year,as a rise in both exports and investment in the manufacturing and SOC sectors offset slumps in the property sector and consumption.The favorable growth performa

243、nce of the two countries has the following characteristics.First,both countries have relied heavily on fiscal stimulus measures.The U.S.has increased support for private consumption through student loan forgiveness71 and an increase in current transfer payments to households,72 and state and local g

244、overnments have continued to invest in infrastructure.In China,the central government has expanded SOC investment on behalf of local governments,which have limited their fiscal spending,by issuing CNY 1 trillion worth of treasury bonds and,more recently,encouraging recoveries in consumption and inve

245、stment by subsidizing the replacement of older consumer durables and equipment with new ones.U.S.economy continues to grow favorably,led by private consumption In China,consumption growth slows and net exports shift to growth U.S.and China expand fiscal spending Figure 1.U.S.growth by sector Figure

246、2.Contribution to Chinas growth Figure 3.Fiscal deficits of the U.S.and China1)Source:BEA.Source:National Bureau of Statistics of China.Note:1)Relative to GDP.Sources:CBO,National Bureau of Statistics of China,Ministry of Finance of China.70 In the first quarter,non-farm payrolls increased by an ave

247、rage of 269,000 per month,a larger increase than in the second half of last year(213,000 in Q3 2023 212,000 in Q4),while the unemployment rate remained low,below 4%,for an extended period of time(3.7%in Q3 2023 3.8%in Q4 3.8%in Q1 2024).71 The Biden administration approved USD 19.5 billion in studen

248、t loan forgiveness for 582,000 borrowers from January to April 2024,bringing the total debt forgiveness approved by the Biden administration to USD 153.0 billion,and announced new programs on April 8(forgiveness of unpaid interest for 23 million borrowers and cancellation of student debt for four mi

249、llion borrowers).72 Transfer payment growth rate(QoQ):+0.7%in Q1 2023 +0.4%in Q2 -0.7%in Q3 -0.2%in Q4 +3.3%in Q1 2024 29 As global fragmentation intensifies due to the U.S.-China conflict and rivalry for advanced manufacturing,encouraging investment through industrial policy is another driver of gr

250、owth.The U.S.has implemented an industrial policy to stimulate business investment by subsidizing strategic industries through the Inflation Reduction Act and CHIPS and Science Act.China has covertly provided various types of subsidies and funds support to its export companies.The United States saw

251、an increase in capital goods imports73 and equipment investment in the first quarter,which seems to be related to the installation of production facilities for new factories for semiconductors and electric vehicles,74 which have increased as a result of the industrial policy.On the other hand,China

252、is aiming to transform its existing labor-intensive industries into advanced manufacturing and high valued-added industries,and as a result of this policy,investment in the manufacturing75 and SOC sectors is estimated to have increased in the first quarter.Meanwhile,recent Chinas growth,driven by th

253、e expansion of exports offsetting sluggish domestic demand,contrasts with the domestic demand-led U.S.growth,a factor that adds bilateral conflicts.China has triggered trade conflicts with the U.S.over its massive trade surplus.During the Trump administration,the United States engaged in trade dispu

254、tes with China by imposing tariffs and visa restrictions,and more recently it has continued to tighten trade rules against China as China increases its exports by maintaining industrial overcapacity and slashing prices and circumventing U.S.tariffs by exporting through third countries.76 U.S.increas

255、es investment in residential,equipment,and IPP U.S.imports increase,led by capital goods Chinas export prices fall,and volumes rise Figure 4.U.S.investment by sector Figure 5.U.S.imports by item Figure 6.Export volume and export unit price index of China1)Source:BEA.Source:BEA.Note:1)Seasonally adju

256、sted.Source:Haver Analytics.73 In the first quarter,the largest increase in U.S.imports was seen in capital goods(QoQ,annualized,7.2%,capital goods 13.2%).By component,imports of computers and peripherals,and parts(36.6%),semiconductors and related devices(31.7%),and industrial equipment(16.9%)rose.

257、74 U.S.investment in structures(QoQ,annualized):30.0%in Q1 2023 +16.1%in Q2 +11.0%in Q3 +11.0%in Q4 -0.1%in Q1 2024 75 In China,the growth of investment in advanced technology and manufacturing in the first quarter(10.8%YoY)was higher than that of total manufacturing investment(9.9%YoY).76 The Unite

258、d States decided to increase tariff rates on Chinese steel and aluminum products and electric vehicles by 17.5%p to 25%p(0 to 7.5%25%)and 75%p(25%100%),respectively.30 Impact of U.S.Growth Trend on the Global Economy The U.S.governments active fiscal and industrial policy have been a driver of U.S.e

259、conomic growth until recently,but it has also limited the impact of monetary tightening and increased uncertainty about the monetary policy pivot.Despite the sharp increase in policy rates from 2022 onward,the U.S.governments reshoring policy for high-tech industries and state and local governments

260、investment in infrastructure have stimulated private and government investment,leading to favorable growth underpinned by domestic demand and a solid labor market.However,this has put upward pressure on prices on the demand side,77 which is a factor hindering disinflation.While market expectations r

261、egarding interest rate cuts by the U.S.Federal Reserve have diminished significantly,global financial conditions such as Treasury bond yields and USD exchange rates,have fluctuated considerably in response to key economic indicators and comments by U.S.Federal Reserve officials,adding to uncertainty

262、 about the path of economic growth and monetary policy conditions in other various countries.Increasing of financial market volatility following economic data and comments by U.S.Fed officials Figure 7.Market expectations for policy rates1)and 10-year Treasury bond yields Table 1.Schedule of release

263、s of key economic data and comments by Fed officials Feb.29 PCE price inflation(2.4%)met expectations.Mar.7 Chair Powells testimony at Congress:“Not far from confidence needed to cut rates.”Mar.12 CPI(3.2%)was above expectations(3.1%).Mar.20 FOMC:It maintained its forecast of three rate cuts in the

264、year,but comments on timing of slowing the pace of declining its balance sheet were seen as dovish.Apr.1 ISM Manufacturing Index(50.3)in March exceeded expectations(48.3).Apr.10 CPI(3.5%)was above expectations(3.4%).Apr.25 GDP for Q1 was announced,and PCE prices were above expectations.May 3 April j

265、ob growth(175,000)was below expectations(240,000).May 15 CPI(3.4%)met expectations.Note:1)Expectations for policy rates reflected in FFR futures.Source:CME FedWatch.77 IMF Fiscal Monitor(April 2024)estimated that the U.S.expansionary fiscal policy raised U.S.core inflation by 0.5%p in 2023.31 The U.

266、S.pursuit of dominance in high-tech industries is reshaping world trade through a shift in U.S.import patterns and the emergence of competing global trade blocs.Recently,the U.S.industrial policy and measures to restrict trade with China have reduced Chinas exports to the U.S.,leading to a sharp dec

267、line in Chinas share of the U.S.import.On the other hand,the share of exports from Mexico and Vietnam in the U.S.imports market has increased.78 The deepening fragmentation of the global economy caused by the U.S.-China trade conflict may benefit some countries,but in the longer term it could pose a

268、 downside risk to global trade and growth by increasing production inefficiencies.79 Meanwhile,Koreas proactive response to the U.S.recovery and industrial policy has increased its share in the U.S.import market.In the process,the linkages between Koreas exports to the U.S.and U.S.consumption and in

269、vestment have been strengthened,and Koreas intermediate goods for export have been diversified by the growing share of new growth industries such as rechargeable batteries and cathode materials,which is expected to have a positive impact on the resilience of exports to the U.S.going forward.U.S.impo

270、rts from China are falling,while imports from Mexico,Vietnam,and Korea are rising Koreas exports to the U.S.diversify into emerging industries Figure 8.Share of U.S.imports by country Figure 9.Share of Koreas intermediate goods exports to the U.S.by item Source:Korea International Trade Association.

271、Note:1)Excluding cathode materials and medicines.Source:Korea Customs Service.Impact of Chinas Growth Trend on the Global Economy China has shifted the focus of its fixed asset investment from real estate to eco-friendly industries and advanced manufacturing and is increasing the production and expo

272、rts of related industries.As the U.S.-China technology rivalry intensifies,China is seeking to shift its growth structure toward advanced manufacturing through technological innovation.Investment in the manufacturing sector has surged since 2021 due to increased government financial support,and inve

273、stment in electrical facilities has grown significantly.As a result,Chinas exports of new energy vehicles and production and export of semiconductors have recently surged,while the U.S.and advanced European countries are tightening their trade restrictions on Chinese exports.Looking ahead,as China i

274、s likely to increase its policy support for and investment in advanced industries such as semiconductors and AI,there is a greater likelihood of trade disputes with major countries and a deepening of global fragmentation.78 In particular,while U.S.imports from China fell sharply last year(-20.4%)and

275、 Mexicos exports to the U.S.continued to grow steadily(+4.5%),China has lost its long-held status as the largest share of the U.S.import market to Mexico.79 The IMF analysis suggests that global losses from fragmentation could range from 0.2%of global GDP to up to 7%,in the case of severe fragmentat

276、ion,and predicted that the costs of fragmentation would be higher if technological fragmentation is added(Julie Kozack,Head of the Communications Department,May 16,2024).32 In China,investment in manufacturing sector and electricity facilities rises,while investment in real estate declines Loans to

277、manufacturing and environmental sectors increased recently Production of semiconductors and new energy vehicles increased recently Figure 10.Chinas fixed asset investment by sector1)Figure 11.Chinas loans by sector1)Figure 12.Chinas production by manufacturing industry1)Note:1)Cumulative.Source:Nati

278、onal Bureau of Statistics of China.Note:1)Real estate includes loans to property developers and mortgage loans.Source:WIND.Note:1)February is the sum of January and February.Source:National Bureau of Statistics of China.On the import side,the expansion of investment in the Chinas manufacturing secto

279、r is advancing the countrys industrial structure and increasing its self-sufficiency in intermediate goods,thereby reducing the effect of the rising exports of Chinas trading partners induced by Chinas economic growth.In fact,the correlation coefficient between Chinas economic growth and imports rec

280、ently stood at 0.47,much lower than in the past(2015-2017,average of 0.77).In particular,as Chinas self-sufficiency in machinery and electronic products has increased,exports have risen significantly since 2022,while imports have fallen markedly,and as Chinas self-sufficiency in semiconductors has i

281、mproved steadily in response to the U.S.restrictions on exports of its semiconductor technology and manufacturing equipment to China,80 Chinas increasing self-sufficiency in manufacturing is likely to limit its imports of intermediate goods from its trading partners.80 Although non-tariff export con

282、trols have recently been widely used for technology security,they may not have much effect in industries where the global value chain is highly extended.The CEPR published research showing that,although Japan imposed export restrictions on key chemicals such as hydrofluoric acid,which is essential f

283、or Koreas semiconductor industry,the effect of the restrictions was not significant because Korea imported the restricted chemicals via the United States,relocated production facilities to China,and increased domestic production of the restricted chemicals(March 2024).33 Correlation between Chinas e

284、conomic growth rate and imports weakens Chinas self-sufficiency in machinery equipment and electronic products increases Self-sufficiency of Chinas semiconductor industry rises Figure 13.Correlation coefficient between Chinas GDP and exports and imports Figure 14.Chinas imports and exports of machin

285、ery equipment and electronic products Figure 15.Chinas semiconductor self-sufficiency Sources:National Bureau of Statistics of China,General Administration of Customs of the PRC.Source:Haver Analytics.Source:Morgan Stanley(April 2024).Assessment and Implications This year,the G2 economy is expected

286、to continue growing,led by domestic demand,supported by fiscal and industrial policies.In the U.S.,private consumption would continue to grow at a steady rate,since the labor demand remains in excess,although the labor market is approaching equilibrium,and government fiscal support continues.81 In a

287、ddition,equipment investment related to industrial policies,82 data centers,and utilities83 is likely to continue.Chinas growth will gradually be driven by domestic demand,because the government would implement policies to support the recovery of private consumption and expansion of investment in ad

288、vanced industries,as China is unlikely to improve its export conditions due to trade tensions with the U.S.84 However,in the longer term,the budget deficits and public debts of both countries,which have risen sharply in the wake of the pandemic,pose a potential risk to their future growth trajectori

289、es.G2 economic growth,driven by domestic demand,is a positive factor for Korean exports in the short term.The expansion of investment in the U.S.and China is likely to affect Koreas capital goods exports,and the U.S.restrictions on Chinese exports are expected to boost Koreas exports of key items su

290、ch as semiconductors and automobiles.However,if the fragmentation between the two countries deepens and each country relies increasingly more on their own production,Koreas exports will be negatively impacted.81 After April,the Consumer Sentiment Index(CSI)shifted to a relatively large decline.For d

291、etails,refer to“Assessment of Recent U.S.Consumer Sentiment Index.”82 A new TSMC plant and two Intel plants are being built and expected to start operation in 2025.83 Big tech companies such as Google,Microsoft,and Amazon have announced plans to expand their data centers to develop generative AI tec

292、hnology and expand services.As a result,demand for electricity is expected to increase,boosting investment in the energy sector.84 The United States has increased its tariffs on Chinese electric vehicles and batteries and is known to be considering ways of sanctioning the Chinese exports that are be

293、ing routed through Vietnam and Mexico to avoid U.S.tariffs.34 Assessment of Recent U.S.Consumer Sentiment Index The University of Michigans Consumer Sentiment Index(CSI)fell relatively sharply in the second quarter of 2024,85 and retail sales were flat in April,showing signs of a slowdown in the con

294、sumption that has driven the U.S.economy to date.The CSI is a sentiment index that is based mainly on surveys of household living conditions,personal finances,and business conditions,so it reflects respondents perceptions of the current situation and future expectations.In particular,the negative(-)

295、correlation86 between the CSI and inflation after the pandemic is found to have strengthened significantly(Figure 16),which seems to be due to the fact that consumers,having experienced historically high inflation,give more weight to price movement in assessing their personal finances and business c

296、onditions.Meanwhile,the correlation between the CSI and consumption shows that the CSI generally tends to coincide with or lead by a quarter the year-on-year growth rate of personal consumption expenditure,but has noticeably weakened since the pandemic(Table 2,Figure 17).Table 2.Leads and lags corre

297、lation between the Consumer Sentiment Index(CSI)and personal consumption expenditures growth rate(YoY)Consumption in current quarter Consumption one quarter ahead Consumption two quarters ahead Consumption three quarters ahead(2000.Q12024.Q1)0.36 0.27 0.21 0.13 (2000.Q1-2019.Q4)0.78 0.74 0.65 0.55 (

298、2020.Q12024.Q1)0.13-0.05 0.20 0.15 In light of these findings,the recent sharp decline in the CSI is likely to be due to:accelerating price increases in March,the possibility of prolonged high interest rates due to the delay in policy rate cuts by the Federal Reserve,and growing concerns that inflat

299、ion,interest rates,and employment could move in unfavorable conditions due to lower employment in April.The future path of the CSI is likely to be largely driven by prices and also influenced by employment and stock price indices,so the decline in the CSI in April and May alone does not foreshadow t

300、he declining trend in consumer sentiment.Moreover,in view of the favorable increase in consumption and recent weakening of the correlation between the CSI and consumption in the first quarter,the negative turn of the CSI since April can hardly be taken as a signal of a rapid contraction in consumpti

301、on in the short term.CSI moves in line with the PCE growth rate,but has been more sensitive to prices recently Figure 16.CSI and PCE price Figure 17.CSI and PCE Sources:BEA,University of Michigan.85 The CSI declined at a faster pace in May 2024,recording 67.4(preliminary),the lowest level since Nove

302、mber 2023(61.3).University of Michigans Consumer Sentiment Index(Q1 1966=100):64.9 in Q4 2023 79.0 in January 2024 76.9 in February 79.4 in March 77.2 in April 67.4p in May 86 Correlation coefficient between the CSI and personal consumption expenditures price index(YoY):0.04(Q1 2000 to Q4 2019)-0.69

303、(Q1 2020 to Q4 2024)35 BOX 2 Assessment of Recent Semiconductor Business Cycle Background The global semiconductor industry began to rebound early last year amid the AI boom87 triggered by the development of ChatGPT 3.5.88 As a result,the domestic production volume of semiconductor industry shifted

304、to an increase in the first half of last year,and the value of exports on a customs clearance basis also shifted to positive growth from the second half of last year,with memory chip prices turning upward.Although semiconductor exports and memory chip prices have continued to improve this year,conce

305、rns about the global semiconductor business cycle have been raised due to weaker-than-expected performance and outlook announcements from some global companies.89 This section reviews the characteristics of past upturns in the global semiconductor industry and examines recent demand and supply condi

306、tions in the market to assess how long the current upturn will last in this cycle.Characteristics of Past Upturns in the Global Semiconductor Business Cycle Looking at the upturns in the global semiconductor business cycle since the 2010s,90 the duration was generally around two years,but the magnit

307、ude of these upturns varied depending on the demand and supply conditions in each cycle.The semiconductor business cycle has generally exhibited the following similar pattern.It began to pick up as new demand for IT expands,such as the increase in demand for smartphones(starting in 2013),expansion o

308、f cloud servers(starting in 2016),and rise in non-contact activities during COVID-19(starting in 2020).In response,semiconductor companies significantly increased investment and production,and as additional demand weakened,oversupply occurred,leading to downturns in the cycle.However,the upturns in

309、the semiconductor cycle have been more pronounced when demand has spread across various sectors.Indeed,the revenue increases during the 2016 upturn,which was marked by expansions in cloud servers and the increase in transaction of crypto assets(servers,PCs,etc.),and the 2020 upturn,which saw an over

310、all increase in demand for IT products due to a rise in non-contact activities(mobile devices,PCs,etc.),were greater than those during the 2013 upturn,which was limited to the expansion of mobile demand.87 As the AI boom began with the development and proliferation of ChatGPT 3.5 by OpenAI,there has

311、 been a significant increase in demand for GPUs capable of performing simple,repetitive mathematical operations essential for AI machine learning,and for high-performance,high-bandwidth memory(HBM)almost exclusively supplied by domestic companies.AI semiconductor Users AI semiconductor producers (De

312、sign)(Manufacturing)(Memory(HBM)production)OpenAI,big tech companies,domestic companies,etc.NVIDIA,AMD,OpenAI,big tech companies,etc.TSMC,domestic companies,etc.Domestic companies,Micron Technology 88 The phases of the global semiconductor cycle were assessed using global semiconductor sales data fr

313、om the World Semiconductor Trade Statistics(WSTS).89 Concerns about a slowdown in the semiconductor industry were raised in April this year,as semiconductor equipment maker ASML reported weaker-than-expected first-quarter results and semiconductor manufacturer TSMC revised downward its global foundr

314、y growth forecast.As a result,stock prices of major semiconductor companies experienced significant declines.90 This section focuses on the period after the 2010s when the primary demand for semiconductors expanded from PCs to include mobile devices and servers,largely influenced by the proliferatio

315、n of smartphones.For reference,the distribution of DRAM demand is as follows:mobile devices(29.1%),PCs(14.2%),and servers(27.2%)(based on 2023 DRAM sales).36 Domestic semiconductor production and exports shifted to an increase last year Memory chip prices have been rising since the second half of la

316、st year The duration of the upturns was similar(about 2 years),but the magnitude varied Figure 1.Semiconductor production1)and exports2)Figure 2.DRAM prices Figure 3.Phases of global semiconductor cycle1)Notes:1)Based on production index(volume).2)On a customs-cleared basis.Sources:Statistics Korea,

317、Korea Customs Service.Source:DRAMeXchange.Note:1)Extracted trends from global semiconductor quarterly sales of the WSTS,using HP filtering.Source:WSTS,authors calculation.Phases of global semiconductor cycle since the 2010s and major characteristics Phase Upturn Downturn Main factors of upturns Star

318、ting time Duration Magnitude of upturn Starting time Duration Magnitude of downturn Phase 1 Increased demand for smartphones Q2 2013 7 quarters 8.0%p Q4 2014 6 quarters-15.2%p Phase 2 Cloud server expansion Q3 2016 8 quarters 26.3%p Q3 2018 8 quarters-26.6%p Phase 3 Increased non-contact activities

319、during COVID-19 Q3 2020 7 quarters 29.7%p Q2 2022 4 quarters-29.1%p Phase 4 AI boom(in progress)Q2 2023 Recent Semiconductor Demand and Supply Conditions From the perspective of global semiconductor demand,AI servers are expected to continue their solid growth,and other sectors,including general ser

320、vers,mobile devices,and PCs,also show potential for improvement.First,as for AI servers,amid the AI boom,big tech companies are continuing to invest in AI server infrastructure,with intensified competition expected to drive further investment in this sector.While AMD,NVIDIAs competitor,has released

321、AI semiconductors,service-oriented tech giants like Google and Meta are also actively developing their own AI chips.The general server market may also see a resurgence in demand,driven by two factors:aging of existing equipment and historical underinvestment.91 In addition,demand for mobile devices

322、and PCs is expected to rise gradually,fueled by the adoption of on-Device AI technology.92 Amid the successful sales of Samsung Galaxy S24,which was equipped with AI features earlier this year,the increasing demand for related 91 Samsung Electronics predicts that the sustained growth of AI servers a

323、nd the corresponding expansion of cloud services will drive up demand for general servers and storage solutions as well(conference call,April 30).92 The potential demand for on-device AI technology in public and retail markets is strong due to several factors,including:robust personal information pr

324、otection,rapid response and stability,affordable communication costs,and the potential for changes in the business ecosystem(from portals and platforms to applications).37 semiconductors is becoming more apparent,with the upcoming iPhone,set to be released in the second half of the year,also expecte

325、d to feature AI capabilities.93 In the case of PCs,while the demand for high-performance computers for AI applications is expected to increase,integrating AI features into mainstream PCs is projected to stimulate replacement demand further.In terms of memory chip supply,supply expansion could be lim

326、ited due to semiconductor companies facing challenges in expanding production capacity for advanced products,and their current emphasis on profitability.For example,the yield of high-performance high-bandwidth memory(HBM)required for AI server semiconductors is known to remain lower than other types

327、 of memory chips due production difficulties.Moreover,given the increased competition following the global financial crisis and the industrys requirement for magnitude investments,only a few memory chip companies have survived,94 leading these semiconductor firms to prioritize profitability over mar

328、ket share to navigate market uncertainties.95 Assessment During the recent upturn,initiated by the AI boom,semiconductor exports have shown a pattern similar to the increase that began in 2016 with the expansion of cloud servers.Considering the current demand and supply conditions,there is a high li

329、kelihood that demand will extend from AI servers to other sectors,coupled with relatively constrained supply,suggesting that the semiconductor business cycle could continue to rise until the first half of next year,with potential to extend even further.This surge in the global semiconductor cycle is

330、 expected to drive growth in the Korean economy due to robust semiconductor exports.96,97 Furthermore,domestic investments in semiconductor production facilities and construction,as well as data center construction,98 are projected to have a positive impact on the Korean economy.93 According to mark

331、et research firm Canalys,Samsung Electronics global shipment of the Galaxy S24 reached approximately 13.5 million units in the first quarter of this year,marking a 35%increase compared to the Galaxy S23,which shipped approximately 10 million units in the same period last year.This improvement in Gal

332、axy model shipments indicates a year-on-year growth,despite the Galaxy S24 launching 19 days earlier than the Galaxy S23.94 In the fourth quarter of last year,Samsung Electronics,SK Hynix,and Micron held 45.5%,31.8%,and 19.2%of the global DRAM market share,respectively,collectively accounting for th

333、e majority(96.5%)of the market.95 While memory chip demand was standardized in the past,resembling a commodity market,the trend toward diversified memory requirements has led to an increase in customized production.96 Domestic semiconductor exports,focused on memory chips used in all IT products,exhibit a strong correlation(0.93,YoY growth from Q1 2010 to Q1 2024)with global semiconductor sales.97