Korea's economic growth halted in the third quarter, US Treasury Secretary 'rejected subsidy for electric vehicles'

Korea's economic growth rate stopped in the third quarter, and the exchange rate is expected to grow by 1.9% next year, with an exchange rate of 1,455 won.

According to a Reuters expert survey on the 25th, Korea's growth rate will stop growing in the third quarter and ease 2.6% this year and 1.9% next year.

U.S. Treasury Secretary Allen reported to reporters on the 24th that "he made a statement that casted cold water on the hopes of a bailout from foreign automakers, including South Korea, who are lobbying to lift restrictions on electric vehicle subsidies."

The Korea Economic Research Institute lowered the economic growth rate to 2.3% this year and 1.9% next year, and predicted the KRW/USD exchange rate of 1,455 won at the 3.5% inflation rate next year.

The Bank of Korea previously raised its growth forecast for this year to 2.6%, and the IMF downgraded it to 2.3% in July.

In a seminar on the 24th, the Korea Economic Research Institute diagnosed that "Korea has a lower inflation rate than the US, and the GDP gap, which shows the gap between real GDP and potential GDP, remains at -1.0%, which is the stage just before stagflation."

Regarding South Korea, a Reuters report on the 25th, as an export-led economy, "Exports from Asia's fourth-largest economy grew at the slowest pace in nearly two years in September," Reuters reported. It was expected to weaken further due to the economic slowdown in China.”

Regarding the worsening export performance in September, Reuters previously reported that "Korea's exports grew at the slowest pace in nearly two years in September as easing global demand puts pressure on the trade-dependent economy, with overseas shipments dropping 2.8% in September. “Asia’s fourth-largest economy, the slowdown in the US, Europe and China, has put a brake on demand for Korean goods, and its export growth has declined to single digits since June.” ” reported on the 1st.

As for Korea's exports, the real GDP growth rate in the second quarter was only 0.7%, 2.9% compared to the same period last year, after the trade balance was in the red for six consecutive months.

“As stagflation is becoming a reality due to high inflation, high interest rates, and high exchange rates, the possibility of entering a recessionary phase in 2023 has increased,” said Lee Seung-seok, associate researcher at Hankyung-yeon, at the 'Economic Policy in the Era of Stagflation' seminar.

U.S. Treasury Secretary Janet Yellen told reporters after speaking in New York after speaking in New York that "I don't know what the Japanese did, they dictated what they did" about reports of the Japanese government's intervention in the currency market, Bloomberg reported on the 24th.

"We've heard a lot of concerns from South Korea and Europe, and we will definitely consider them," Allen said.

Bloomberg reported that the remarks were "a remark that poured cold water on the expectation that it would bail out foreign automakers, including South Korea, who are lobbying to lift restrictions on electric vehicle subsidies."

 

Regarding Japan's adherence to low interest rates, the New York Times reported on the 25th that "the divergence of economic conditions in the United States and Japan has led to significant changes in monetary policy, which has helped the yen depreciate as investors seek better returns elsewhere. “In September, excluding food and energy, the Japanese price rose only 1.8% compared to the previous year, but in the United States, the figure was 6.6%,” the report said.

 

“In the United States, where the economy is recovering quickly and wages are skyrocketing, the Fed is trying to curb inflation by curbing demand," the New York Times said. "Wages stagnated as Japan's large economy hardly returned to pre-pandemic levels and unemployment remained below 3% during the worst months of the pandemic on the labor market."

 

Japan's Finance Minister Suzuki said at 8:00 on the 24th, "Right now we are dealing with speculators through the market. We are going to face it. Excessive volatility through speculation is completely unacceptable." It rose from the 149 yen level to the second half of the 145 yen level in 10 minutes.

 

On the 25th, Yomiuri said, “An explanation is needed to endlessly repeat foreign exchange interventions using national finances, which are unlikely to have any effect in the short term. "Until the end of the US rate hike is seen, there is no way to see the future of the fight for patience between the government, the Bank of Japan and speculators."