The South Korean government plans to lower its economic growth forecast for the country this year to reflect the slump in the semiconductor industry. According to a report by Yonhap News Agency on the 25th, the South Korean government is expected to lower the original economic growth forecast of 1.6% by 0.1%-0.2%. The South Korean newspaper "Seoul Economic Daily" quoted government sources as saying that the Ministry of Planning and Finance will release the "direction of economic policy for the second half of the year" next week and make final adjustments to this year's economic growth forecast. Officials from the Ministry of Planning and Finance stated that although the forecast is not yet finalized, the downward adjustment is not expected to be significant based on recent economic trends. Prior to this, the Bank of Korea, the Korea Development Institute, the Organization for Economic Cooperation and Development (OECD), and the International Monetary Fund (IMF) have all lowered South Korea's economic growth forecast to 1.4% or 1.5%.
The decline in South Korea's semiconductor industry has already had a certain impact on the overall economy. Since August 2022, South Korea's semiconductor exports have been continuously declining. In May of this year, South Korea's semiconductor exports decreased by 36.2% year-on-year, amounting to only $7.37 billion. Lee Chang-yong, the Governor of the Bank of Korea, stated that the chip industry is expected to hit bottom in the fourth quarter.
"Seoul Economic Daily" pointed out that South Korea's major export product, semiconductors, has a significant impact on the economy. Due to the impact of "deteriorating external conditions" on high-growth strategic industries such as semiconductors and batteries, their contribution to economic growth has declined. According to a report by the Korea Institute for Industrial Economics & Trade, every 10% increase in semiconductor and battery sales will contribute 0.248% to South Korea's economic growth rate. Therefore, there have been calls for the government to urgently adopt supportive policies to maintain South Korea's position as a manufacturing powerhouse.
To promote economic vitality in the second half of the year, the South Korean government plans to focus on the export and investment sectors. In addition to the semiconductor and display industries, the government will also increase investment in infrastructure and food sectors. "Seoul Economic Daily" states that the variable for South Korea's economy in the second half of the year still lies in exports.