Third Time Charm
Korea's central bank has lowered its growth forecast for this year once again, citing contracted consumption due to the Middle East Respiratory Syndrome (MERS) outbreak, sagging exports, and drought. The downgrade is the third this year after those in January and April.
The Bank of Korea (BOK) on July 9 revised its estimate on the nation’s gross domestic product growth down to 2.8 percent from its earlier forecast of 3.1 percent in April. Earlier, the central bank lowered its growth outlook of 3.4 percent down to 3.1 percent in the first month of the year.
Lee Ju-yeol, governor of the central bank, attributed the downward revision to weaker-than-expected growth in the second quarter. The central bank had estimated first-half growth at 2.4 percent. But exports decreased 1 percent year-on-year in the Jan.-June period due to unfavorable foreign exchange circumstances and weak global demand. Also, MERS fears hit consumer sentiment hard, to drop local demand.
In a separate press conference, deputy governor of the bank Suh Young-kyung said that the MERS outbreak pared 0.3 percentage points off economic growth, while the severe drought slashed 0.1 percentage points off the rate.
The central bank, however, drew a rosy picture of the second half, expecting the economy to grow 3.1 percent, with consumer spending gaining 2 percent and exports jumping to 3.9 percent.
Finance Minister Choi Kyung-hwan also said at the briefing on the results of the Trade and Investment Promotion Meeting on the same day, “The nation could achieve 3 percent level growth this year when the revised supplementary is executed in a timely manner and the measures for reviving the nation’s economy create effects.”
In the meantime, the BOK left its consumer price growth estimate for the year unchanged at 0.9 percent. In April, the central bank had sharply lowered the projection from 1.9 to 0.9 percent.