Korean Economic and Industrial Outlook for 2023

The Korean Economic and Industrial Outlook is published quarterly by the Korea Institute for Industrial Economics and Trade. Visit www.kiet.re.kr for more projections and industrial statistics. In the first half of 2022, the domestic real economy recovered thanks to improved consumption and increased exports, but in the second half of the year, the effects of the economic slowdown became more evident as global inflation intensified, and energy and raw materials prices increased. In 2023, the global economy will grow slowly due to geopolitical uncertainty, tighter monetary policy in major countries, and COVID-19-related uncertainties. International oil prices are expected to fall compared to last year due to a decrease in crude oil demand following interest rate hikes in major countries and a global economic slowdown. However, there is a possibility that supply-demand conditions may deteriorate due to production cuts by major oil-producing countries, which will limit the drop in international oil prices. Meanwhile, the KRW/USD exchange rate may remain at a high level due to the possibility of additional interest rate hikes by the US Federal Reserve (the Fed) and the slowdown in global growth, but may also stabilize at a lower level due to the gradual narrowing of the Korea-US interest rate spread in the second half of the year. In 2023, the domestic economy is expected to grow by 1.9 percent, lower than the previous year, owing to a slowdown in consumption driven by the influence of tighter monetary policy.