South Korea’s Economic Growth Projected to Surpass Potential Rate in 2024, According to Yoon

SEOUL (Reuters) – South Korean President Yoon Suk Yeol announced on Tuesday that the country’s economy is expected to exceed its potential growth rate in 2024 following a pickup in the second half of 2023. He emphasized the importance of strengthening ties with the United States to enhance crisis management capabilities.

In a speech addressing next year’s proposed budget, Yoon stated that the government is closely monitoring both economic and security situations and is prepared to implement response measures promptly.

"The pace of economic growth will continue to expand in the second half of the year as previously forecasted… and by next year, it will exceed the potential growth rate, achieving a higher growth rate than that of major countries," he stated.

Policymakers estimate South Korea’s potential growth rate to be around 2%, which reflects the maximum economic growth achievable without causing inflationary pressures.

According to data from the Bank of Korea, the country’s gross domestic product (GDP) grew by 0.6% from July to September, maintaining the same growth pace as in the prior quarter and surpassing a median forecast of 0.5% growth from a Reuters survey.

A recent survey predicted that economic growth would slow to 1.2% in 2023, down from 2.6% in 2022, but would rebound to 2.1% in 2024. In contrast, the government projects growth rates of 1.4% for this year and 2.4% for the next.

In August, the government presented its 2024 budget plan, which included the smallest increase in two decades due to declining tax revenue amid slower economic growth. The budget of 656.9 trillion won (approximately $487 billion) for 2024 reflects a 2.8% increase from the previous year.

Yoon reiterated the significance of maintaining fiscal discipline to stabilize domestic inflation and uphold the country’s credit ratings. He also prioritized strengthening security partnerships with the United States and other allies, asserting that economic cooperation with Washington could enhance South Korea’s crisis management capabilities.

Additionally, he committed to fostering mutually beneficial cooperation with China, South Korea’s largest trading partner.