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[Alpha Biz= Kim Sangjin] According to the Bank of Korea (BOK), the BOK's Economic Research Department estimates that due to political uncertainty and economic psychological contraction caused by the martial law situation, this year’s growth rate is expected to decrease by approximately 0.2 percentage points (p), primarily due to domestic consumption and other internal factors.

As the domestic economy freezes, the real Gross Domestic Product (GDP) is expected to shrink significantly, leading to a lower economic growth forecast for both the fourth quarter of last year and this year.

Accordingly, the BOK had initially forecast a growth rate of 1.9% for this year in its economic outlook published on November 28th, prior to the martial law. However, the outlook now suggests that the growth rate could fall to 1.6% to 1.7%. 

 

The BOK anticipates that in the revised economic outlook scheduled for next month (on February 25), the forecast will be adjusted downward by 0.2–0.3 percentage points, with approximately 0.2 percentage points attributed to the effects of the martial law.

With the initial growth forecast of 1.9%, the real GDP for this year would have been 2,335.437 trillion won. If the growth rate drops to 1.7%, the real GDP would fall to 2,330.853 trillion won, a decrease of 4.584 trillion won.

This means that, under the assumption of a 1.7% growth rate, the impact of the martial law would cause a gap of this magnitude in the real GDP.

Additionally, the fourth-quarter GDP of last year has already been severely impacted. The BOK expects that the growth rate for the fourth quarter, to be released soon, will be only 0.2%, much lower than the previously expected 0.5%.

Assuming the growth rate for the fourth quarter of last year is 0.5%, the annual real GDP for last year would have been 2,291.891 trillion won; if the rate is 0.2%, it would have been 2,290.174 trillion won, a difference of 1.717 trillion won.

In summary, when combining the GDP reduction from the revised growth projections for both last year's fourth quarter and this year's annual growth, the total reduction amounts to 6.301 trillion won.

 

 

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