Korean Economic and Industrial Outlook for 2018

Korea’s real economy posted a relatively solid performance in 2017, anchored by robust export growth and a sharp increase in facility investment that drove domestic demand. The rate of global economic growth is expected to be similar to the levels seen in 2017, aided by modest growth in advanced economies and the ongoing recovery of developing economies. International oil prices are projected to increase to 57 USD per barrel, due to greater demand for crude oil amid a global economic recovery and the extension of production cuts agreed upon by OPEC producers. The KRW/USD exchange rate is anticipated to inch down over the previous year due to geopolitical risk and others amid the appreciation of the won. Despite a slight slowdown in exports and investments, the Korean economy is forecast to expand by 3% in 2018, buoyed by a recovery in domestic consumption. Based on 11 major industries, Korea’s export base should continue on its current course of expansion through 2018, supported by semiconductor-led IT export growth and the continuing recovery of emerging markets. Yet the overall growth rate is expected to slacken somewhat in 2018 compared to the previous year, due to persistent global oversupply and the proliferation of trade protectionism. Production meanwhile is on track to increase slightly year on year, as positive economic conditions stimulate corporate investment and private consumption. Domestic demand is also expected to increase since IT industries see an uptick in demand as the technologies of the Fourth Industrial Revolution continue to disseminate, and new government policies aimed at facilitating wage-led growth and job creation should help bolster private sector consumption