This year’s growth rate is maintained at 1.4% in Korea… US 0.3%P – Japan 0.6%P increase
The International Monetary Fund (IMF) maintained Korea’s economic growth rate forecast for this year at 1.4%, the same as before, but lowered its forecast for next year by 0.2 percentage points to 2.2%. This suggests that the three high waves of high interest rates, high exchange rates, and high oil prices will continue next year amid China’s economic slowdown and the United States’ independent growth.
The IMF released its World Economic Outlook report on the 10th (local time) and predicted that the Korean economy will grow by 2.2% next year. The forecast was revised downward from 2.4% announced in July of this year. This year’s growth forecast remained at the July forecast of 1.4%, which had been lowered for the fifth time in a row since January of last year, but the gap with the United States (2.1%) and Japan (2.0%) has widened.
Unlike the United States and Japan, which enjoyed an upward trend based on strong consumption, the Korean economy was adversely affected by the ‘China risk’. Previously, in July, the IMF predicted, “The Korean economy’s growth may improve starting in the second half of the year if the effects of China’s re-opening (resumption of economic activities) take effect and exports increase.” However, in its October report, the IMF said that the economic downturn caused by real estate is deepening and lowered its growth forecast for China by 0.2% and 0.3% points, respectively, from July to 5.0% this year and 4.2% next year.
The global growth forecast for next year was also lowered by 0.1 percentage points to 2.9%. Pierre Olivier Gaurinchas, chief economist at the International Monetary Fund (IMF), said, “A growth rate of less than 3% is low below the historical average,” and “the global economy is limping.”
Pierre Olivier Gaurinchas, chief economist at the IMF, predicted that the gap in economic growth rates will widen next year as the ‘solo growth’ of the United States and Japan contrasts with the ‘downtrend’ of Korea, China, and the euro region.
In fact, the gap in this year’s growth rate forecasts between Korea, the United States, and Japan is gradually widening. The IMF predicted that the Korean economy will grow by 1.4% this year, consistent with the forecast announced in July, but raised the figures for the United States by 2.1% and Japan by 0.3% and 0.6%, respectively, to 2.0%. If this continues, Korea’s growth rate will reverse that of Japan for the first time in 25 years since the foreign exchange crisis in 1998. The IMF said, “Japan’s economy is expected to grow at a higher rate thanks to a surge in tourists, an explosion of suppressed consumption, and a rebound in automobile exports that had shrunk due to supply chain bottlenecks.”
The widening gap with the U.S. economy, which is supported by strong consumption, could lead to high interest rates and a strong dollar, increasing the risk of capital outflow. This is because if the U.S. Federal Reserve (Fed) prolongs high-intensity austerity amid confidence in a soft landing of the U.S. economy, the interest rate gap with Korea may widen.
As the IMF lowered Korea’s growth forecast for next year by 0.2 percentage points from 2.4% to 2.2%, there are also concerns that low growth may be solidifying. An official from the Ministry of Strategy and Finance said, “Although we have recently sought to diversify exports, we are still highly dependent on the economic downturn in China.” 영향을 받을 수밖에 없고 세계 성장률이 0.1%포인트 하향 조정된 점도 영향을 미쳤다”고 말했다.
Meanwhile, the average forecast for Korea’s economic growth next year by eight global investment banks (IBs), including Goldman Sachs, recently compiled by the Center for International Finance was 1.9%. Kim Sang-bong, professor of economics at Hansung University, said, “Korea has already entered a long-term low growth situation for several years.”
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Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.