The Hyundai Research Institute (HRI) has forecasted that the South Korean economy will enter a recovery phase after passing its lowest point this year.
According to a report titled “Now is an Important Time to Form an Early Economic Cycle Bottom” released by the HRI on March 3, there is a high possibility of entering the recovery phase this year after passing through the contraction phase of the 12th business cycle and entering the expansion phase of the 13th business cycle in terms of economic cycles.
For each sector such as production, consumption, and investment, the report considered the peak of 2022 as the apex of the 12th economic cycle and assumed last year’s minimum as the nadir, calculating the difference between the peak and the minimum as an economic judgment index. If the economic judgment index exceeds 0 and rises, it is interpreted as passing through the economic trough and entering a recovery phase. If it exceeds 1, it is interpreted as a strong recovery surpassing the peak recorded in 2022.
Based on this analysis, the production economic judgment index recorded its lowest point in January of last year, followed by a strengthening recovery trend in the latter half of the year, reaching 1.68 points in September. This indicates that a stable recovery phase has been entered. It is assessed that production in the service sector showed a stronger recovery trend compared to the mining and manufacturing sector.
The facility investment economic judgment index continued its recovery trend after reaching its lowest point in July of last year. The recovery trend was particularly strong in the machinery sector, and equipment investment in the information and communication technology (ICT) sector has been on the rise since reaching its lowest point in April of last year.
On the other hand, the trends in consumption and construction investment differ. The consumer economic judgment index remained near its lowest point after forming a trough in October of last year, recording 0.15 points in November and 0.02 points in December. Durable goods, semi-durable goods, and non-durable goods all showed a sluggish trend. It is assessed that the construction investment economic judgment index may not have formed its low point until the end of last year with a significant possibility. In particular, the construction investment economic judgment index has continued to decline since reaching its highest level in February of last year at 3.89 points, recording a low point in December.
Shin Ji-young, a senior researcher at the HRI, stated, “Overall, it is expected that the domestic economy will pass through or come close to passing through its trough, and efforts should be made to swiftly establish a comprehensive economic recovery phase.”
The recommendation emphasized the need to focus on policy implementation in vulnerable sectors such as consumption and construction investment due to the significant differences in the speed of recovery among sectors. While production and equipment investment are categorized as being in a “stable recovery phase” and “entering a recovery phase,” respectively, consumption and construction investment are categorized as being in the vicinity of a “trough” and a “contraction phase,” respectively.