UOB Group’s Economist Ho Woei Chen, CFA, comments on the 2021 GDP figures in South Korea.

Key Takeaways

“South Korea’s 4Q21 GDP growth was in line with consensus and our forecast at 4.1% y/y, 1.1% q/q seasonally-adjusted as it maintained a steady recovery. The South Korean economy recovered by 4.0% in 2021 from a contraction of 0.9% in 2020.”

“We see robust external demand (in particular for technology products), gradual recovery in private consumption as well as government support measures to keep South Korea’s growth at an average of 3.0% in 2022, in line with Bank of Korea (BOK)’s and our forecasts.”

“The robust economic backdrop and higher inflation suggest that the BOK will proceed with its monetary policy tightening this year. We maintain our forecast for another 50 bps interest rate hike to 1.75% by end-2022 given the hawkish posturing, likely with 25 bps each in 2Q and 3Q.”