Barclays Raises South Korea GDP Forecast to 18.4% on Export Strength

Barclays raised South Korea's nominal GDP growth forecast to 18.4% for this year in a report released on the 9th, citing strong export price growth. The investment bank also revised the current account surplus projection upward from $266 billion to $345 billion. Economist Son Beom-ki attributed the adjustment to robust export pricing rather than real economic shocks, maintaining the real GDP growth forecast at 2.7% for this year and 2.2% for next year. According to the Bank of Korea, the cumulative current account surplus from January to May reached $141.28 billion, already exceeding last year's level of $123.05 billion.

Barclays Revises South Korea GDP Forecasts Upward

Barclays presented a nominal GDP growth rate of 18.4% for this year and 4.7% for next year in its report. The investment bank maintained its real GDP growth forecasts at 2.7% for this year and 2.2% for next year. Under a "bull-case" scenario, Barclays projected real GDP growth of 3.3% for this year and 2.2% for next year. This optimistic scenario assumes stronger export volume growth, a sustained investment upcycle, and domestic spillover effects leading to private consumption through 2027.

Export Price Strength Drives Current Account Surplus Adjustment

Son Beom-ki, Barclays economist, explained that the current account surplus forecast adjustment resulted from strong export price growth. He characterized the impact as nominal rather than real, which informed the decision to keep real GDP growth projections unchanged. The Bank of Korea data showed the January-to-May cumulative current account surplus of $141.28 billion surpassed the previous year's total of $123.05 billion.

Foreign Investment Inflows Expected to Continue in Bond Market

Son assessed that foreign investor capital inflows into South Korea's bond market will likely remain sustained. He estimated World Government Bond Index (WGBI) demand-driven inflows at $40 billion after applying a haircut, rather than the government's estimate of $55 billion to $60 billion. Son forecasted that capital inflows will maintain relatively high levels.

FAQ

What did Barclays forecast for South Korea's GDP growth this year? Barclays forecasted South Korea's nominal GDP growth at 18.4% for this year and real GDP growth at 2.7% in its baseline scenario, or 3.3% under a bull-case scenario.

Why did Barclays raise South Korea's current account surplus forecast? Barclays raised the current account surplus forecast from $266 billion to $345 billion due to strong export price growth, which economist Son Beom-ki described as a nominal rather than real economic impact.