A leading state-run think tank in Korea on Wednesday cut its growth forecast for the nation’s economy from 3.5 percent to 3 percent due to a sluggish recovery from slowing exports.
The Korea Development Institute (KDI) also warned that real growth could fall further to the 2-percent range if fiscal and monetary policies and key reforms are not effectively implemented and pushed for.
The think tank said slowed growth in China and emerging markets are hurting Korean exports, as well as the weaker yen and euro. Exports could inch up 1.1 percent this year and imports 2.6 percent, it added, but a big trade surplus of US$110 billion is expected this year and US$100 billion next year.
Korea’s economic growth rate last year was 3.3 percent.
A KDI researcher said cutting interest rates could be advisable to raise market liquidity, adding that the Bank of Korea could conduct two rate cuts in the year’s second half if things do not pick up.
Inflation could reach 0.5 percent this year, with the core inflation rate reaching 2.1 percent, down from the KDI’s previous predictions of 1.8 percent and 2.3 percent, respectively.
By D.H.Peter Kim