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IBs: Korea’s Growth Rate Will Improve in 2H

According to the Korea Center for International Finance (KCIF) Monday, foreign investment banks expressed positive views for Korea’s growth rate in the second half of the year, as Korea’s gross domestic product (GDP) in the second quarter improved from the last quarter’s 0.8 percent to reach 1.1 percent.

They analyzed that the record high GDP since the first quarter of 2011 amid reduced facility investment was due to a rise in government spending, more construction investment and increased private consumption.

Morgan Stanley noted that the first quarter is a trough of an economic cycle, adding that the Korean economy is likely to improve in the second half although global economic uncertainties serve as obstacles.

Goldman Sachs and Citigroup forecast that Korea’s GDP will show quarterly growth of about 1 percent with gradual global economic growth and the United States’ continued economic stimulus measures. They expected the Bank of Korea to raise the key interest rate in the third quarter of next year.

However some investment banks pointed out that Korean economic recovery is not likely to continue due to concerns regarding reduced exports based on China’s economic slowdown and sluggish private consumption.

The Societe Generale noted that the increase in construction investment is temporary due to government spending, adding that the slowed Chinese economy and a low yen will play against Korea’s exports and manufacturing industry.

It also suggested that additional macro-prudential measures are required to prevent increased foreign exchange volatility.

The HSBC forecast that the United States will take additional macro-prudential measures to avoid capital flow and increased volatility in the financial market due to reduced quantitative easing.

Source Text

Source: Newsis (July 29, 2013)

** This article was translated from the Korean.

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