Korea set for steady GDP growth to end of decade
20 February 2013
By Asia Asset Management
Despite market concern over Korea’s declining GDP growth, which fell to a three-year low at 2% last year, HSBC Global Research notes that growth is tracking at roughly the same rate as the US back in 1990, when US GDP per capita was equivalent to Korea’s today. As such, it asserts that Korean growth does not appear too low given its level of development.
The firm calculates that the trend growth, the underlying expansion of an economy after stripping out seasonal and cyclical components, will average 3.4% for 2011-15, revised down from the 3.9% due to the low 2012 GDP print. Looking ahead, HSBC expects higher productivity to cushion the upcoming demographic shifts and expects trend growth to sustain at 3.4% through 2020.
“Our call for GDP to rise 3.8% this year remains intact on the back of an export-led recovery, with growth skewed towards 2H 2013,” says the February report titled ‘Averting the New Normal’.
“Attention should be focused on raising productivity. Although Korea invested relatively more resources over the past decade, this has not led to higher growth. We believe there’s plenty of room to raise efficiency, which may be achieved by expanding services and small- and medium-sized enterprises. President-elect Park has placed particular priority on the latter and will likely gear government policy towards achieving this in her five-year term.”
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