On August 19th we hold our annual “budget planning” session in which we look at the Korean economy 2021-2022. The second year of Covid-19 has been a much more prosperous year to date at a macroeconomic level than 2020, although the wealth and income gaps has continued to grow. The fact that the K-Covid experience was milder than that of most other countries in the world did not make it any the less disruptive in terms of personal income and expenditure, stretching across leisure, educational and social activities and dividing the country by demographic if not social classes.
There is a good chance that the MOEF forecast for 2021 of over 4% will be achieved, though there are signs of a global slowdown in recovery. Our 2020 forecast always saw 2022 as being a strong year for growth with most domestic agencies now forecasting 3%. Given the way that the covid pandemic continues to evolve and with new variants expected, 2022 can hardly be a new normal year, unlike our previous expectations when we made the forecast last year.
The next stage in the evolution of the pandemic, the world’s reaction to the climate crisis, and the degree to which recovery or partial recovery with inflation are all ingredients in the forecast for 2022-23. In Korea this is compounded by the Presidential election. August 19 is probably too soon to know who are the main contenders who will emerge from the primaries to be held, but we can make some predictions, and the possible policy outlooks. There are a number of road-maps to be completed by the end of the year. One worrying set of options announced this month are the zero carbon road-maps. Two of the three are not zero solutions, and the third is a rather devious route. This suggests that MOTIE is not on board with any attempt to cut emissions in the near future.
Major companies are more flexible that MOTIE, and if Korea is to succeed later in the 2020s the degree to which the chaebol and other companies adapt quickly is important. The early August IPO of Kakao Bank gave the internet bank a market cap 50% more than that of any Korean brick and mortar bank. This is a symptom of the imbalances in the economy. With real estate investment channels blocked by both taxes on domestic property and uncertainty about the needs of future prime commercial real estate, the domestic stock market is the one channel available for both wealthy and ants to invest in. Government needs to develop its own new normal road-map that takes into account all its current initiatives alongside the way economic environment is changing.
Which businesses and which economies will thrive in this new world and how much will everyone’s business need to adapt to the Korea of 2022-23? Join us for what is always one of the great KBF sessions of the year. If you are not yet a member, please contact us early, as the number of spaces for guests for this session will be limited.
Managing Director, KABC Ltd.