NAIROBI: The South Korean economy is expected to grow 3 percent in 2016 from this year amid a prolonged slump in exports and a delay in the recovery of domestic demand, a major think tank said Wednesday.
The forecast by the Korea Institute of Finance (KIF) is grimmer than the government’s prediction of 3.3 percent and the Bank of Korea’s 3.2 percent projection. But it is slightly higher than forecasts made by South Korean private economic think tanks. The KIF also predicted Asia’s fourth-largest economy to expand 2.6 percent on-year in 2015, down from a 2.8 percent estimate made four months earlier.
“Sluggish exports are expected to continue to weigh down the economy next year,” KIF researcher Lim Jin said. “But the government’s measures to boost domestic consumption and positive signs from economic growth in the third quarter kept our projection at the 3 percent level.”
In the July-September period, the South Korean economic growth stood at 1.2 percent on-quarter, reaching a five-year high, thanks to a strong rebound in domestic demand, central bank data showed. According to the KIF, exports are forecast to grow a mere 0.4 percent in 2016 from this year as the sluggish recovery in China will offset increasing imports to advanced economies.
Private spending is expected to increase 2.2 percent next year, accelerating from the 1.9 percent on-year gain in 2015, on the back of recovering consumer sentiment and a fall in prices of raw materials and economic growth.
The think tank also forecast facility investment to rise 4.8 percent next year, slowing from this year’s 5.2 percent gain, as companies scale back capital spending amid sluggish exports.
The KIF projected South Korea to post a current account surplus of US$95.1 billion next year, slightly lower than this year’s estimated $105.2 billion. The jobless rate is likely to come in at 3.5 percent, lower than this year’s estimated 3.7 percent, according to the organization.
