SEOUL: Korea’s growth forecast for the second quarter is not so rosy. Citing 14 global investment banks, Bloomberg says the Korean economy is expected to grow an average of 2.7 percent in the second quarter from a year earlier.
Barclays’ projection was the highest, at 3.1 percent, while Nomura and IHS Economics both predict the economy will grow 2.4 percent. The Korean economy posted 2.5 percent growth in the first quarter, and the dull projections for the second have raised questions about whether Korea will be able to reach its growth target of 3-percent for the year.
The banks cited an unexpected drop in spending and a blow to the tourism industry due to the MERS outbreak, as well as a decline in exports, as some of the main factors. An economist from Morgan Stanley, for one, warned that Korea’s growth rate for exports could dip to levels not seen since the global financial crisis.
This comes amid the general slowdown in the global economy, especially in China — which is Korea’s main trading partner. The weak Japanese yen has also eroded the price competitiveness of Korean exports. The expert predicts the country’s exports will fall 3.1 percent in the second half of the year.
Considering the figure fell 5-percent in the first half, Korea’s exports are expected to record minus 4-percent growth this year — the lowest since the 2009, when exports fell almost 14 percent. To reverse the trend, some of the banks called for more expansionary measures to prop up growth.
HSBC said more rate cuts are needed in addition to a planned budget supplement of about 10 billion U.S. dollars by the Korean government. ANZ Bank also said without a sufficient level of support from the government, Korea will not be able to reach 3-percent growth in 2015.
