Korea to lag emerging markets in growth

Korea will likely be ranked 11th among 13 major emerging economies in terms of economic growth this year, according to projections by research institutes at home and aboard.

Citing analysis from investment banks, some local economists on Wednesday forecast that Korea’s 2015 gross domestic product growth will likely stay below 2.5 percent. This could the lowest after Brazil and Russia, both of which are projected to post a negative growth.

India is estimated to see on-year growth of 7.4 percent, followed by China with 6.8 percent, Indonesia with 4.8 percent, Poland with 3.7 percent, the Philippines with 5.7 percent and Thailand with 2.7 percent.

The Asian Development Bank predicted in September that emerging nations in Asia will expand 5.8 percent on a collective basis. Further, as Citigroup’s recent outlook on the world’s GDP growth has been set at 2.6 percent, there is a feasibility that Korea’s growth will even stay under the international average.

LG Economic Research Institute cited China’s economic slowdown as the main unfavorable factor dragging down the Korean economy, saying that “the local manufacturing sector is highly dependent on exports to China.”

Further, as international trade balance has shrunk, the nation’s growth potential is estimated to have already dropped from the 3-percent level to the 2-percent level, it said.

Yonsei University professor Sung Tae-yoon said the nation has faced risks of both global deflation and China shocks. He predicted that deflation has entered a critical phase, and China’s slowdown could deal a long-term blow to Korea.

Sung said it may not easy for the nation to record a growth rate of 2.5 percent this year.

Hyundai Economic Development Institute also revised down its outlook on the economic growth to 2.4 percent from its earlier estimate of 2.7 percent.

Some think tanks say that as Korea’s economic scale has de facto expanded to that of advanced countries, its growth pace also resembles them.

But a majority of economists and analysts share the view that Korea, despite its economic size similar to major advanced countries, is still susceptible to external risks. When negative factors hit the global market, Korea has suffered massive capital outflows along with major emerging economies, they point out.

Meanwhile, a poll from the Bank of Korea showed that local manufacturers remain pessimistic about the business conditions in October due mostly to falling domestic consumption and exports.

The business survey index of manufacturing businesses stood at 70 for October, down from 71 in the previous month.

A reading below the benchmark 100 means pessimists outnumber optimists while a reading above 100 means the opposite.

“A slump in private consumption and other economic uncertainties continued to be major concerns for manufacturers,” the BOK said.

Out of 1,748 manufacturing firms surveyed, 27 percent cited a dip in their local sales as a major obstacle, while 19.9 percent said they were concerned about uncertain economic conditions.

In contrast, a report from Oxford Economics showed that Korea is the second-best equipped among 13 emerging economies to ride out a crisis if the global economy suddenly worsens.

Only the Philippines was ranked higher on the list for being least vulnerable to external factors, according to the research unit of Oxford University.

By Kim Yon-se (kys@heraldcorp.com)