Following the pandemic, South Korea remained in the middle to lower range in terms of growth rates among advanced economies. However, it ranked higher in terms of price stability indicators. This suggests a ‘trade-off’ between investment-led growth expansion and tight fiscal policy.
According to the International Monetary Fund’s (IMF) World Economic Outlook (WEO) on Oct. 29, South Korea is projected to record an annual growth rate of 1.4% this year, following 2.6% last year. This prediction aligns with forecasts from the Bank of Korea and the government.
Combining the past year and the current, the growth is 4.1%. Among the 41 advanced economies classified by the IMF, South Korea ranks 25th, following the U.S. at 4.15%, which is below the 41-country average of 5.9%.
On the other hand, South Korea’s performance in inflation metrics was notable. South Korea’s Consumer Price Index (CPI) is projected by the IMF to rise by 3.4% this year, following a 5.1% increase last year. With a combined two-year increase of 8.5%, it is much stable than the 41-country average inflation rate of 13.6%, ranking the 6th lowest.
Over the past two years, South Korea’s lower growth rate was balanced by suppressed inflation, a phenomenon termed “macro indicator trade-off.” Other major countries also showed a trend where reduced growth led to suppressed inflation.
After the pandemic, global growth leaders included developing and major tourist countries. Macao had the highest growth rate at 47.6%, followed by countries such as Ireland (11.4%), Andorra (10.9%), Malta (10.7%), Iceland (10.6%), Israel (9.6%), Portugal (9.0%), Croatia (8.9%), and Greece (8.4%).
Among the 11 countries with a nominal GDP over 1 trillion dollars, Spain had the highest growth rate of 8.2%, followed by countries like Australia (5.5%), the Netherlands (4.9%), Canada (4.7%), the U.K. (4.6%), Italy (4.4%), the U.S. (4.15%), South Korea (4.1%), France (3.5%), Japan (3.0%), and Germany (1.3%). South Korea ranked 8th.
Without considering the rapid growth of smaller countries and focusing on the “economic powerhouses,” South Korea’s growth was relatively low. A downturn in the semiconductor industry in the second half of the previous year and the lesser-than-expected impact of China’s economic reopening contributed to this.
Based on the Organisation for Economic Co-operation and Development (OECD) standards, the growth rate was around average. As of the end of Q2 this year, real GDP increased by 2.3%, making it 102.3 compared to the end of 2021 (with a baseline of 100). This places South Korea 16th among the 38 OECD countries.
In terms of inflation rates among the 11 countries with a nominal GDP of over 1 trillion dollars, Japan had the lowest two-year inflation rate at 5.7%, followed by South Korea at 8.5%. Subsequent countries include Canada (10.4%), France (11.5%), Spain (11.8%), and the U.S. (12.1%). Notably, the U.K. had a significant inflation increase of 16.7%.
Using the OECD standard, the inflation metric was favorable. As of September, compared to December 2021 (with a baseline of 100), South Korea’s Consumer Price Index rose by 8.6% to 108.6. Among the 34 countries that can be compared until September’s inflation metric, South Korea had the fourth-lowest increase after Switzerland (104.7), Japan (106.1), and Israel (108.3).
Choo Kyung-ho, deputy prime minister and minister of strategy and finance, has emphasized a tight fiscal stance since the first half of the year, stating, “We need to focus on controlling inflation first. After stabilizing prices, we should then ‘turn’ towards economic growth.”