SEOUL (Reuters) – The rising cost of living is likely to hurt South Korea’s economy much more significantly in the first half of this year than previously thought, its top government research agency said on Thursday.
The Korea Development Institute (KDI) cut its economic growth forecast for the January-June period to 1.1% in annual terms from 1.4% seen in November, mainly due to slowing private consumption. That is less than half the five-year average of 2.3% growth for the comparable period.
Still, it kept the 1.8% growth forecast for the entire 2023, citing an accelerating recovery in the Chinese economy as the driving factor, although acknowledging huge uncertainty over the economic prospects in the giant neighbour.
South Korea’s economy, Asia’s fourth-largest, slipped into its first contraction in 2-1/2 years in the final quarter of 2022 due to a crash in exports.
The central bank has said growth in all of 2023 would slow to 1.7% from an estimated 2.6% gain in 2022.
(Reporting by Choonsik Yoo; Editing by Shri Navaratnam)