Uncertainty looms amid high borrowing costs, delayed BOK easing AMRO chief

Hoe Ee Khor, chief economist of the ASEAN+3 Macroeconomic Research Office (AMRO) / Courtesy of AMRO

The Korean economy faces uncertain growth momentum for the remainder of 2024, despite a surprise 1.3 percent quarter-on-quarter growth in the first three months of this year, the chief economist at the ASEAN+3 Macroeconomic Research Office (AMRO) said.

A pick-up in private consumption, construction investment and resilient export growth led to the stronger-than-expected gross domestic product (GDP) growth of Korea, AMRO Chief Economist Hoe Ee Khor said.

However, elevated borrowing rates due to the delay in Bank of Korea (BOK) rate cuts and household debt will continue to pose a drag on private consumption, already hamstrung by the slower-than-expected disinflation and the recent depreciation of the won.

The troubled construction sector will largely remain clouded by lingering challenges from project financing loans, as reflected in last year’s decline in housing construction starts. This will affect construction activity in the near term, in his view.

“The only bright side for Korea is the near-term sustained export momentum dependent upon the firm demand for semiconductors,” he said in an interview with The Korea Times.

Among key factors that will influence the timing of the BOK’s rate cuts are the strength of domestic demand and the trajectory of global oil prices and further delays in the U.S. Federal Reserve’s policy rate cuts.

The volatile Korean won is another factor. The won has fluctuated against the dollar in the range of 1,350-1,400 won per dollar since April this year, propelled by the dollar’s global strength.

“The combination of mentioned factors can push back the BOK easing,” he said.

AMRO is an international organization seeking to secure the macroeconomic and financial resilience and stability of its 14 member economies. Included are the 10 member states of the Association of Southeast Asian Nations (ASEAN), as well as China, Hong Kong, Japan and Korea.

Khor is responsible for overseeing and developing the work on macroeconomic and financial market surveillance of ASEAN+3 member economies. Prior to joining AMRO, he was a deputy director of the Asia and Pacific department at 카지노사이트킹 the International Monetary Fund (IMF), responsible for overseeing the surveillance work on six ASEAN and 12 Pacific Island countries. He obtained his bachelor’s degree in economics/mathematics from the University of Rochester and a Ph.D. in economics from Princeton University. Below is the full interview conducted with him.

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