Korea Development Institute
The Korea Development Institute (KDI) said on Nov. 9 that a one percentage point decline in China’s economic growth rate can lower the global economic growth rate by up to 0.5 percentage points and Korea’s by up to 0.62 percentage points.
“If the Chinese economy, which is expected to record a growth rate of 7 percent or so this year, posts a 6 percent growth next year, Korea’s economic growth rate can fall to slightly over 2 percent in that the current consensus provided by research institutes at home and abroad is approximately 3 percent,” it explained, continuing, “Specifically, private consumption growth is estimated to decline by 0.2 percentage points, total investment by 0.4 percentage points, the consumer price index by 0.1 percentage point and the current balance with respect to the GDP by half of a percentage point in this case.”
The institute also pointed out that industrial restructuring is inevitable for China due to its severe overproduction, and the restructuring is likely to affect Korea’s key industries such as petrochemical, machinery, aviation, electrical and electronics. “Assuming that the restructuring results in a 10 percent cut in production in each of the oil and coal, chemical, metal, construction and machinery industries of China, Korea’s chemical industry output can be lowered by 4.3 percent, and the decrement is expected to reach 2.9 percent in each of the oil and coal and aviation sectors and 2.6 percent in the electrical and electronics industry,” the KDI added.
It also remarked that the industrial restructuring in China could limit the growth of the Korean economy for a while and Korea needs to be prepared for it by means of the enhancement of its own financial soundness.