South Korea inflation to ease at faster pace due to weak demand, says KDI think tank

Credit: REUTERS/Kim Hong-Ji

SEOUL, Feb 14 (Reuters) - South Korea's state-run think tank said on Wednesday inflation was expected to cool at a faster pace this year than previously projected to reach the central bank's target by the end of the year.

In its revised economic forecasts, the Korea Development Institute (KDI) projected inflation to slow to 2.5% in 2024 from 3.6% in 2023.

That is lower than 2.6% seen three months earlier, when the think tank had raised the figure for this year from 2.4% and said monetary policy should remain restrictive.

"Inflation is expected to ease at a slightly faster pace than the previous forecast due to weak domestic demand," KDI said, citing high interest rates.

"The inflation trend will reach near the price stability target of 2.0% at the end of 2024," it said.

KDI often conducts research for the government but rarely gives specific policy suggestions. Market participants tend to read policy advice from the think tank as the views of the finance ministry.

Economic growth is expected to speed up to 2.2% in 2024 from 1.4% in 2023, unchanged from the previous forecast, KDI said, listing geopolitical conflict in the Middle East, China's property slump and debt restructuring by domestic builders as risk factors.

(Reporting by Jihoon Lee Editing by Chris Reese)


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