Negative Outlook
The Korea Development Institute (KDI) predicted that the Korean economy would grow by 3.5 percent next year, lowering the estimate by 0.3 percentage points in six months, while adjusting its growth forecast for this year from 3.7 percent to 3.4 percent.
“If the global economic growth rate remains at approximately 3.3 percent next year, the Korean economy may barely show a 3 percent growth,” it said, adding, “Next year’s inflation is estimated at 1.8 percent, but the actual figure is likely to be 1 percent or so when the tobacco price hike is counted out.”
According to its report released on Dec. 10, the 3.5 percent growth target can be achieved only when the global economy remains well on the recovery track and the countries’ expansionary macroeconomic policies does the trick to act positively on Korea’s domestic demand and export. “The global economy has been more uncertain this year than in 2013, and the Korean economy is still in stagnation in the wake of the sinking of the Sewol Ferry in April,” the institute explained, continuing, “Private consumption and investment are showing no meaningful recovery, either.”
As examples of measures to deal with the difficulties, it suggested the continuation of expansionary fiscal policy, efforts for tax revenue increase, and coping with the downward price pressure, and preemptive action against household debts.
In the meantime, the OECD has estimated Korea’s economic growth for 2014 and 2015 at 3.5 percent and 3.8 percent and the IMF at 3.7 percent and 4.0 percent, respectively.