South Korea economic growth to exceed potential rate in 2024, Yoon says

SEOUL (Reuters) – South Korean President Yoon Suk Yeol said on Tuesday the economy in 2024 would exceed the potential growth rate after picking up pace in the second half of 2023, and pledged closer ties with the United States to bolster crisis management capabilities.

The government is closely monitoring the economic and security situations and prepared to take response measures in a timely manner, Yoon said in a speech to parliament on next year’s proposed budget.

“The pace of economic growth will continue to expand in the second half of the year as forecast earlier … and by next year it will recover beyond the level of the potential growth rate and record a higher rate than major countries,” he said.

South Korea’s potential growth rate – the maximum economic growth that can be achieved without triggering inflationary pressure – is estimated to be around 2%, policymakers have said.

Gross domestic product (GDP) grew 0.6% in the July-September quarter from three months earlier, Bank of Korea data showed last week, the same pace as the prior quarter and beating a median 0.5% increase forecast in a Reuters survey.

In a Reuters survey conducted early this month, economic growth was forecast to slow to 1.2% in 2023 from 2.6% in 2022, followed by a recovery to 2.1% in 2024.

The forecasts compare with the government’s projection of 1.4% growth this year and 2.4% next year.

The government in August unveiled its 2024 budget plan that included the smallest increase in two decades amid weakening tax revenue due to slower economic growth.

The 656.9 trillion won ($487 billion) government expenditure plan for 2024 was 2.8% higher than 2023.

Yoon again stressed the importance of fiscal discipline to help stabilise domestic inflation and sustain the country’s credit ratings.

Yoon highlighted his priority on maintaining security ties with the United States and other allies and said economic security cooperation with Washington could bolster the country’s crisis management capabilities.

He also pledged South Korea would maintain mutually beneficial cooperation with China, South Korea’s largest trading partner.

($1 = 1,348.7800 won)