KDI Forecast This Year’s Growth Rate as 2.6 Percent

The Korea Development Institute (KDI) significantly dropped this year’s forecasted economic growth rate to 2.6 percent.

This would be the lowest rate in the five years since the foreign exchange crisis in 1998, when it dropped to -6.7 percent. Also, this figure does not reach even half of last year’s growth rate of 6.3 percent.

It was pointed out that for next year, Korea’s economic growth rate will recover to 4.8 percent, with sudden changes in politics and uncertain conditions outside of the economy as the main factors for the forecasted rate.

KDI wrote about the economy forecast with the report “Business recovery is becoming delayed on account of slumping domestic demands of facility investment and consumption, which has become more serious than expected, and unfavorable factors such as strikes and typhoon unexpectedly occurring” and “This year’s Gross Domestic Product (GDP) growth rate will cease at the 2.6 percent rate.”

This year’s quarterly growth rate was estimated to be the following: first quarter-3.7 percent, second quarter-1.9 percent, third quarter-2.3 percent, and fourth quarter- 2.4 percent

KDI had forecasted this year’s growth rate to be 5.3 percent last year but lowered it to 4.2 percent in April, to 3.1 percent in July, and again lowering it this time around.

The “Domestic demands shrinks-export improves” state will continue on through the end of this year, and this year’s total consumption was forecasted to cease at -0.3 percent and facility investment at 1.4 percent. On the other hand, this year’s current account surplus that was estimated to be 1.8 billion dollars will increase significantly to 6.4 billion dollars.

Regarding next year’s forecasted conditions, KDI reported, “While the world’s economy recovers, our growth rate may rise to the high four percent mark, but if uncertainties in the direction of the government’s economic policies and political affairs are amplified, then economic activity of enterprises and other main components of the economy will continuously decline.”

Kwang-Hyun Kim kkh@donga.com