As usual our January session is concerned with the prospects for Korea in 2022. It has been said that the only function of economic forecasting is to make astrology look respectable( Ezra Solomon) To the contrary the purpose of economic forecasting is to make businesses look at their business plans for the coming year and make adjustments or take precautionary measures.
We are looking at Korean economy and society which faces a series of challenges in the coming year. Underlying the consensus forecast of about 3% GDP growth (BOK, KDI) 3.1% ( MOEF) (built on around 4% in 2021). KDI’s latest newsletter states the downside risks are the dominant theme in considering these prospects. We have the ambitious plan to cover no less than 9 of the risks in our January 20 session.
- First is whether Korea’s next President will understand all the challenges of the changing world?
- What are virus’s plans for 2022 – more delta, more omicron, deltacron, pi,rho, sigma? And how do we respond?
- Exports have been the driver of much of 2021’s growth. The growth in value of exports in 2021 was 25.8%. The consensus forecast for 2022 is 3-5% export growth by value. Do 2021 prices stick or contract?
- The US is trying to build a US oriented global supply chain, enlisting Korea as it does, but the pre 2020 supply chain was a China based supply chain. China is largely excluded from this US vision. Korea is conflicted in this transition, with implications for Korea’s open supply chain to be converted to a future closed US supply chain.
- About one third of the households and one third of SMEs (perhaps higher in both categories) are bleeding to debt. But the government wishes to constrain household debt to GDP ratios (myth of the time bomb).
- The presence of bubbles, spikes and airpockets (housing, chip demand, oil, gas) largely is sending the wrong signals to investors and producers and cutting across what should be the lesson from the supply chain difficulties of 2021
- Long covid socio-economic issues in debt hangover, education deficits and changes in work place habits and capabilities are eating at part of the core of future growth prospects
- COP-26 succeeded in putting GHG at the top of the agenda, but did not make the message urgent enough, especially to busy people trying to do something else
- The return of inflationary uncertainty is complicating all these issues. Are we having a price spike or are we back in the early 1980s? At the extreme end what is the value of anything in the economy?
If you are interested in seeing how we approach these issues, and how they could affect your business or organisation please join us for our first KBF session of 2022. We are waiting to see if the restrictions on meetings due to end on January 16 to decided whether the meeting will be purely on line or hybrid.
Managing Director, KABC Ltd.