Is Korea's economy in a big crisis due to the Bank of Korea's downward GDP forec

- Is Korea's economy in a big crisis due to the Bank of Korea's downward GDP forecast?

Today, the Bank of Korea cut its key interest rate by 25 basis points, lowering it to 3% per year. In addition, it also revealed GDP growth forecasts for this year and the next two years, with GDP growth forecasting 2.2% this year and 1.9% and 1.8% in 2025 and 2026, respectively.

In August alone, this is a sharp downward correction from a forecast of GDP growth of 2.4% for this year and 2.1% for 2025.

The Bank of Korea cited sluggish domestic demand and sluggish exports as the rationale for the decline in the forecast.
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What was most shocking was that the GDP growth forecast for next year was in the 1% range. It seems to indicate that South Korea is now in the low-growth phase, which is undeniable.

However, it is difficult to over-interpret the decline in GDP growth projections. Breaking down GDP shows why: GDP consists of "consumption" + "investment" + "government spending" + "trade balance."

If you intuitively feel economic growth, you can recognize that you make a lot of money by exporting a lot, but in reality, it contains "consumption," and it is large enough to account for more than half of GDP (consumption accounts for 50% in Korea and 65% in other countries).
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Consumption growth also declines in countries with declining populations. Consumption increases as much as population growth, but when the population begins to decline, the inflation rate and the population decline rate conflict, determining the extent of consumption increase or decrease. As a result, we face a situation where long-term consumption does not increase, such as Japan and Italy.

(In this sense, GDP is an indicator that implicitly presupposes population growth. When we mix countries with countries with increasing population and decreasing population, the formula for GDP has limitations in easily calculating economic growth rates. When consumption is stagnant, some countries will see the same figure even though consumption is stagnant because domestic demand is sluggish, others will see the same figure even though domestic demand is decreasing and domestic demand is good. The downsides of dimensionality start to show. Of course, there is no perfect indicator in the world.)
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In other words, there are "more" aspects that cannot be viewed as an indicator of GDP as we enter a period of population decline. The gap between changes in GDP during population decline and corporate growth has widened in other declining countries, Japan and Italy, and Germany, which have declined twice in the past.

Japan is probably most familiar to us, so let's take an example of Japan's population decline. Japan has not been able to help GDP grow since 2008, as consumption has no longer increased. It played a role in maintaining the status quo of GDP. On the other hand, Japanese companies began to recover their competitiveness in the early and mid-2010s, and through this period, competitive companies are performing quite well.

If you look at the financial statements of Japanese companies, there are more and more companies that are profitable, and the profit margin is growing. So the NIKKEI index has exceeded its all-time high, and Warren Buffett also bought Japanese stocks. Naturally, the prices of apartments near where these companies are located exceeded their all-time high several years ago.
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However, Japan's GDP remains stagnant because consumption growth has stopped and it has not led to GDP growth, followed by rising import prices due to the low yen and, to a large extent, rising energy import prices due to the post-nuclear policy.

GDP is stagnant, but companies are growing, their net income is increasing, their asset markets are growing. Can we interpret this as "growth" just because GDP is not rising?
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It is difficult to properly grasp the economic situation using GDP alone in the section where the population is decreasing. If you invest, you should focus on growth, but it is even more difficult to judge the economic situation based on GDP alone. No, you shouldn't just look at GDP from an investment point of view and discuss growth.

As the population declines, corporate growth becomes even more important. There is a forced transition from quantitative growth to qualitative growth. Another word for qualitative growth is "discriminatory growth."

When the population is declining, we need to persistently look for "growing companies." Stocks should be targeted at companies with increasing exports, and real estate should be near growing companies.
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The Bank of Korea's cut in its benchmark interest rate and the outlook for GDP growth are certainly among the factors to be concerned about. However, the nation's economy has begun to move with the changed rule of "population decline." Fortunately, there are some countries that have experienced population decline more than us. It's time to look at them and gauge how the nation's corporate and asset market growth will flow in the future.

Concerns about Korea's corporate competitiveness have always existed five years ago, 10 years, 15 years, 20 years ago, and even longer. However, Korean companies have grown by finding a breakthrough in some way in that situation. The Korean Peninsula has been a highly competitive composition for 5,000 years.

It's overconfident to think that a country and a business that has been doing well for decades is going to break at once just because they've had a population decline, and this time it's different approach.

The track record, or our country, has been steadily overcoming the crisis for a long time, so it's more reasonable to think that we'll continue to work through it. The road doesn't seem to be smooth.
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Finally, when the population decreases, the importance of exports will inevitably increase. In this respect, I conclude with the opinion that it will be difficult to avoid the weakening of the won.

Thank you.