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Foreign Banks Lower South Korean Economic Growth Estimates Again
Korean Economy Forecast to Grow 2.5% in 2019
Foreign Banks Lower South Korean Economic Growth Estimates Again
  • By Jung Suk-yee
  • February 11, 2019, 10:31
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Foreign investment banks have lowered again their estimates of South Korea’s economic growth for this year. 

Foreign investment banks again lowered their estimates of South Korea’s economic growth for this year with its total exports having declined for the second consecutive month, led by a decrease in semiconductor exports, and its investment showing no signs of recovery for months.

Specifically, nine foreign investment banks’ average as of the end of last month is 2.5 percent, down 0.1 percentage point from a month earlier. The estimate is 2.6 percent for the Bank of Korea, the Korea Development Institute, and the IMF. It is 2.4 percent for Credit Suisse and 2.5 percent for Barclays and UBS. The foreign investment banks also mentioned that the South Korean government’s fiscal policy would lead to an insufficient economic stimulus.

Earlier, the average estimated by the investment banks was lowered from 2.8 percent to 2.7 percent in September 2018 and to 2.6 percent in November 2018. Goldman Sachs and UBS lowered their estimates to less than 3 percent in August 2018. Citi adjusted its figure from 2.6 percent to 2.5 percent in October 2018 and to 2.4 percent in December 2018.

Likewise, the investment banks estimated this year’s inflation in South Korea at 1.6 percent. “Real estate price adjustment is likely to result in a fall in housing cost while poor employment conditions are limiting the inflationary pressure on the demand side with the government’s welfare policy expanding and oil prices falling,” they said, adding, “The Bank of Korea may lower the key interest rate in the second half after freezing it in the first half.”
 

In the meantime, the foreign investment banks estimated this year’s global economic growth at 3.3 percent last month, down 0.3 percentage point from a month ago. They mentioned a decline in international trade attributable to the ongoing trade war between the United States and China, a slowdown of the Chinese economy, U.S. political uncertainties, Brexit-related uncertainties, global financial contraction and a fall in oil prices as factors likely to affect consumer and investor sentiments.