The KABC Second Chance Korea Business Forum

Bubbles Ahead: The Prospects for the Korean Economy in 2022

8.00am – 9.30am, Wednesday 9 February 2022 at the Online Seminar Room

Dear member,

Our January session was concerned with the prospects for Korea in 2022.   The purpose of the session was to make businesses and organizations look at their business plans for the coming year and make adjustments or take precautionary measures.

The session presented possible outcomes for the Korean economy and society in 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 stated that downside risks are the dominant theme in considering these prospects. On January 20  I argued that Korea had a certain immunity to many of the factors which threatened the world economy but had its own issues of concern.  Since January 20 we have seen covid daily infections rise to 20,000 per day, and a shortfall in exports growth to cover the value of imports (risk 2 and risk 3 below).  I shall address recent developments since January 20 and make the updated slide set available to everyone on February 7th.

We had the ambitious plan to cover no less than 9 of the risks in our January 20 session.

  1. First is whether Korea’s next President will understand all the challenges of the changing world?
  2. What are virus’s plans for 2022 – more delta, more omicron, deltacron, pi,rho, sigma?  And how do we respond?
  3. 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?
  4. 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.
  5. 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).
  6. The presence of bubbles, spikes and air pockets (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
  7. Long covid socio-economic issues in debt hangover, education deficits and changes in workplace habits and capabilities are eating at part of the core of future growth prospects
  8. 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
  9. 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 discussing these issues and seeing how we approach these issues, and how they could affect your business or organization please join us for our first second chance KBF session of 2022.

Note next regular session will be held on February 17th.  The title is Korea’s new industrial portfolio  and take up the issue of slowing exports versus imports and government industrial plans.

Tony Michell

Managing Director, KABC Ltd.


Published On: February 3rd, 2022 / Categories: Event, Korea Business Forum /

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