Omicron Could Disrupt Growth Momentum

After two years of disruption brought on by covid-19, Asian Markets are poised for a strong recovery. Nations are racing to vaccinate larger parts of their populations in an effort to ease restrictions and to encourage investment and boost spending. However, the emergence of the Omicron variant could disrupt this growth. Countries have implemented some form of foreign travel ban, and South Korea has been forced to reverse its reopening plan after a surge of cases in November and December. Keep reading to learn how South Korean economy is handling the outbreak, the outlook for South Korean exports, and how increasing domestic demand is a priority on the peninsula in 2022.

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Key forecast revisions in South Korean economy

Market Trends in South Korea

The South Korean economy continues to battle its months-long COVID-19 outbreak, which has showed no signs of slowing down. Consumer spending remains restrained by the country’s COVID-19 outbreak, and inflation hit a 10-year high in November, with consumer prices growing by 3.7%. High prices are being felt across the economy, with rising food and fuel costs ramping up the inflationary pressure.

Although South Korean exports had a fantastic year in 2021, that performance is unlikely to be matched in 2022. Supply chain bottlenecks and high input prices began weighing on manufacturers in Q4 2021.

Looking Ahead

The South Korean government has made increasing domestic demand a top priority in 2022. They approved the KRW 607.7 trillion (USD 512.6 billion) national budget in early December 2021 with over USD 80 billion to be spent on ensuring inclusive growth. This will boost income and consumption levels through support measures for SMEs and households. Improving domestic demand has become the top priority in terms of economic policy, and firms can expect the government to closely pursue this goal in 2022.

For more information on how South Korea is attempting to boost domestic demand and combat its months long Covid outbreak read our latest APAC Market Monitor.

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