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2021’s macroeconomic outlook

Author Economic Outlook and Analysis Division Date 2020.12.03 Issue No

Amid persistent uncertainties due to COVID-19, the domestic economy in 2021 is expected to grow by 3.2 percent year over year (YoY) thanks to gradual improvements in domestic and overseas demand and the base effect from negative growth in the previous year.


While uncertainty due to COVID-19 continues to be the most significant variable in 2021, other factors include the economic recovery trends of advanced economies, the effect of economic stimulus measures, developments in U.S.-China tensions, and domestically, the effect of the Korean New Deal and trends in semiconductor exports.


Consumption has sufficient room for improvement due to the base effect of the negative growth in the previous year. However, in the midst of sluggish employment, household debt and rising residential costs, concerns over slowing wage growth and dwindling corporate earnings and the burden on the government regarding additional stimulus measures, improvement in consumption is likely to be rather limited.


As for facilities investment, despite the uncertainty and persistence of COVID-19, solid growth is expected, driven by the recovery of the semiconductor business and preemptive investment in the ICT sector. Investment in construction is also likely to recover, largely in the civil engineering sector, thanks to the government’s plan to build social overhead capital (SOC)-related public infrastructure.


The negative impact of COVID-19 is expected to subside as nations’ grow better at coping with it and exports are likely to expand by large margins as China and other major economies recover. The low base effect from the economic downturn during the preceding year will also have an effect.