- Growth forecast for 2023 cut on slower private consumption
- Inflation outlook to remain above 5% for rest of 2022
According to Bloomberg article published on October 17, 2022, economists surveyed by Bloomberg see the Bank of Korea (BOK) reaching the end of its hiking cycle early next year, a view that largely tallies with a central bank projection that the terminal interest rate may rise to around 3.5 per cent.
The BOK will probably raise its seven-day repurchase rate by 25 basis points to 3.25 per cent at its November meeting, according to the latest median estimate of a Bloomberg survey. With another hike during the first quarter of next year expected, the rate will hit 3.5 per cent and likely stay there through the end of 2023, the survey said.
The response from economists follows comments last week by BOK governor Rhee Chang-yong that the board sees the terminal rate reaching 3.5 per cent, give or take. After raising the benchmark rate by 50 basis points, the BOK also stuck with its August forecast of gross domestic product expanding 2.6 per cent this year but hinted that it might lower the projection for next year.
Bloomberg’s survey showed most economists kept their 2022 growth forecast at 2.6 per cent while revising down the 2023 GDP projection to 1.9 per cent from 2.1 per cent.
“For now, we maintain our 2022 projection at 2.7 per cent,” said Lloyd Chan, an economist at Oxford Economics. “We have further lowered our GDP growth forecast for South Korea by 0.3 percentage points to 1.3 per cent in 2023, reflecting downgrades to our US and European growth outlooks, as well as rising interest rates.”
Economists also downgraded their inflation outlook to 5.5 per cent from 5.8 per cent for the current quarter through year-end, while keeping the annual forecast at 5.2 per cent. Next year’s annual outlook rose to 3.1 per cent from 2.9 per cent, the survey showed.
