■ In South Korea, real private consumption appeared lethargic in 2023 due to the stagnation in real purchasing power, driven by a sharp rise in consumer prices (3.4%) and a decline in the real economic growth rate (1.4%).

- In both 2022 and 2023, the growth rate of real purchasing power stagnated due to falling real income relative to consumption. This slump resulted from the sharp rise in international oil prices in 2022 and the marked decline in semiconductor prices in 2023.

- Additionally, the steep upward trend in consumer prices triggered the adoption of a high-interest rate policy, further exacerbating sluggish private consumption (see Current Affairs I).

■ Going forward, the conditions for real private consumption are projected to gradually improve as the real economic growth rate expands and the value of income relative to consumption increases.

- A majority of forecasting agencies project the economic growth rate to rise to the mid-2% range in 2024, bolstered by a rapid increase in exports, higher than the 2023 figure (1.4%).

- Furthermore, in 2024, the capacity to spur private consumption is expected to experience meaningful expansion as real purchasing power substantially improves due to the marked rise in semiconductor prices.

- However, high interest rates, outside the purview of this report, are still expected to act as a delaying factor for the recovery of private consumption.

■ Therefore, it is assessed that the current situation does not require short-term macroeconomic policies to stimulate private consumption.

- Given the high probability of gradual moderation in consumption stagnation propelled by improving real purchasing power, it is not advisable to consider stimulus measures as requiring urgent action. It is also noteworthy that such policies could disrupt the ongoing trend toward inflation stabilization, potentially delaying interest rate cuts.

- In addition, given that the trends of private consumption and income eventually sync up, the policy focus should be structural reforms that improve income-generating capacity by boosting medium- to long-term economic dynamism.