Country Forecast South Korea June 2018 Updater

Country Forecast South Korea June 2018 Updater

  • June 2018 •
  • Report ID: 1697278 •
  • Format: PDF


  • Moon Jae-in of the liberal Minjoo Party won the presidential election in May 2017. The Economist Intelligence Unit expects him to serve out his full term, which is constitutionally limited to five years. An able bureaucracy will support efficient policy implementation.
  • Although politics will remain heavily polarised, we believe that Minjoo is well positioned to win the next parliamentary election, due in 2020. Minjoo's ambitious economic agenda is progressing at a steady pace and the president's popularity has been buoyed by the country's engagement with North Korea. The ruling party is therefore well placed to increase its seat count at the expense of the conservative opposition and centrist political parties.
  • Despite ongoing engagement efforts, we maintain our view that a complete denuclearisation of North Korea is unlikely. This means that security ties between South Korea and the US will remain strong. Despite warming ties with China, it will remain difficult for South Korea to regard its influential neighbour as a reliable security partner.
  • The Moon Jae-in administration will pursue an ambitious demand-driven economic agenda through increased government spending and redistributive policies. Despite strong momentum to curb the role in the economy of the chaebol (family-run conglomerates), we expect the dominance of these enterprises to continue over the forecast period.
  • The Bank of Korea (South Korea's central bank) will seek to pursue a modest monetary policy tightening cycle in 2018-22. However, this will be interrupted in order to help the domestic economy to weather the impact of a slowdown in the US in 2020.
  • Real GDP will grow by an annual average of 2.9% in 2018-22. In the absence of a significant rebalancing away from exports and towards domestic demand, the economy will remain hostage to ebbs and flows in global trade. As a result, potential global trade disruptions caused by rising Sino-US tensions would have spillover consequences for South Korea's external sector.
  • The current-account balance will stay in the black, as exports will benefit from overall supportive global demand conditions in 2018-22. South Korea will nonetheless face greater competition on certain key export items from peers in the region, including China.


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