0
Shipping containers are stacked at Pyeongtaek Port in Gyeonggi Province. /Yonhap News Agency

Major foreign investment banks (IBs) have raised their average forecast for South Korea's economic growth this year to 3.7%. With semiconductor exports remaining strong and third-quarter growth far exceeding expectations, the country's growth outlook has been revised upward for seven consecutive months. The projected current account surplus as a share of gross domestic product (GDP) has also approached 20%.

According to the Korea Center for International Finance (KCIF) on Thursday, eight major investment banks forecast South Korea's real GDP growth this year at an average of 3.7% as of the end of October, up 0.2 percentage points from a month earlier. The figure has been revised upward for seven consecutive months, from 2.4% in April.

By institution, Barclays raised its forecast by 0.6 percentage points from 3.2% to 3.8%, while Goldman Sachs increased its projection from 3.2% to 3.7% and Nomura from 3.2% to 3.6%. JPMorgan slightly lowered its forecast from 4.0% to 3.9%, but upward revisions by other institutions pushed the average forecast higher.

The improved outlook is attributed in part to stronger-than-expected economic performance in the third quarter. According to preliminary figures released by the Bank of Korea (BOK) on Oct. 27, real GDP grew 1.0% from the previous quarter, far exceeding the forecast of 0.3%.

The stronger-than-expected third-quarter growth is estimated to have raised the annual growth rate by approximately 0.35 percentage points. Even if fourth-quarter growth remains flat at 0.0% quarter-on-quarter, annual growth is estimated to reach 3.6% this year.

Forecasts for the current account surplus have also been raised to reflect strong exports. The eight major investment banks projected South Korea's current account surplus at an average of 19.4% of nominal GDP this year, up 1.9 percentage points from the previous month.

The projected gap in the current account surplus-to-GDP ratio between South Korea and Taiwan has narrowed to 1.6 percentage points, with Taiwan's ratio forecast at 21.0% this year. At the end of last year, the forecasts for South Korea and Taiwan stood at 7.0% and 17.5%, respectively, a gap of 10.5 percentage points. By August this year, the gap had narrowed to 3.4 percentage points, with South Korea at 18.1% and Taiwan at 21.5%.

The outlook for South Korea's economy next year has also improved. The eight investment banks raised their average growth forecast for next year by 0.1 percentage points from the previous month to 2.9%. Their average forecast for next year's current account surplus as a share of GDP also rose by 2.1 percentage points from a month earlier to 19.5%.

                                                                                                               Lee Ji-hoon