The Bank of Korea has lowered the outlook for the nation’s economic growth this year and next year from the early expectations of 2.9 percent and 2.8 percent each to 2.7 percent. This is the lowest since 2012, when the nation had a 2.3 percent economic growth in the face of Europe’s struggles to deal with the global financial crisis.
For this year’s outlook, the Bank of Korea revised down its forecast for growth in investment in plant and equipment from 1.2 percent to 0.3 percent. Growth construction investment was predicted to stand at minus 2.3 percent, while those of exports and consumption are forecast to come in at 3.5 percent and 2.7 percent.
For next year, the central bank predicted the growth rate of plant and equipment investment would turn around to 2.5 percent while the rate of investment in construction would further struggle to register minus 2.5 percent. The growth rate of exports and consumption is expected to be 3.2 percent and 2.7 percent each.
The outlook for the job market is also grim.
This year, the number of jobs created was initially expected to be around 300,000 but has so far turned out to be around 90,000. The nation is estimated to generate only 160,000 jobs next year.
The reason behind this pessimistic figure is a weaker global economic growth outlook, which is estimated by the central bank to be 3.6 percent.
Early this month, the International Monetary Fund also lowered its forecasts for global economic growth next year to 3.7 percent from 3.9 percent that was released in April, citing rising trade protectionism and instability in emerging markets.
Some analysts said that, despite the downward revision, the central bank’s outlook was still optimistic.
Lee Mi-sun, a researcher at Hana Financial Investment, said the growth of investment in equipment and consumption would be lower than the BOK’s prediction, saying, “It is uncertain whether next year’s economic growth could reach 2.7 percent.”
The IMF and the Organization for Economic Co-operation and Development revised down the nation’s growth forecast for this year to 2.8 percent and 2.7 percent, both from 3 percent. For next year, the IMF and OECD predicted the growth at 2.6 percent and 2.8 percent.
The nation’s two private research centers, Hyundai Research Institute and LG Economic Research Institute, set next year’s national economic growth at 2.6 percent and 2.5 percent, respectively.
“In order to recover the investment which is base for the economic growth, the key is the ease of market regulations and efforts to discover new growth industries that can lead to job creation in the private sector,” said Ju Won, a researcher at Hyundai Research Institute.
The government is slated to hold an economic ministerial meeting on Wednesday to unveil a set of new policies to revitalize the tight job market. The ministers are expected to create jobs within public organizations or ministries and temporarily reduce fuel surcharges to promote consumption.
By Shin Ji-hye (firstname.lastname@example.org)