On August 19th we held our forecasting meeting for 2022-23. Your second chance to hear this forecast will be given on September 9th.
Time does not stand still and by September 9th we have a complete set of data for July and a summary for August which shows that despite some problems in the supply chain, exports still grew by 35% to US$53 billion. Markits Purchasing Managers Index showed that manufacturing expansion in August was the slowest month in the last 10 months. The seasonally adjusted South Korea Manufacturing Purchasing Managers’ Index (PMI®) dipped from 53.0 in July to 51.2 in August, signalling a more modest improvement in the health of the manufacturing sector. Data for July shows that a number of indicators were lower for July than for June 2021.
All this spells problems for the growth target of 4 – 4.2% for 2021 and for 3% for 2022. Korea needs to average 4% per annum GDP growth for the last two quarters of 2021. A further problem was the inflation rate in August stubbornly refused to decline but stayed level pegging at 2.6%. This suggests that monthly inflation rate will be above 2% pa for the rest of the year unless oil prices dip. A further problem is that BOK has been the first advanced country to raise its interest rates by 0.25%. The reasons to do so are that borrowing is so cheap that the well to do and big business are borrowing more, as are households in the bottom 40% on the rocks just to stay alive. The flat rate will have negligible impact on the richer 30% of Koreans and disastrous impacts on the poorest 30% who are already struggling. The more so because the new limit will be a total of one years income, 12 million won for those at the bottom and 144 million won for those at the top.
It also appears that Governor Lee Jae-myung will be the official candidate for the Democratic Party in the February 2022 elections. This still has to be confirmed by the rest of the selection process.
Please join us for this session.
Managing Director, KABC Ltd.