IMF slashes Korea’s growth forecast on global outlook

The Korean economy is again expected to take a beating this year on account of bleak global economic conditions.

The International Monetary Fund on Tuesday lowered its forecast for Korea’s economic growth this year to 2.7 percent, down from the 3 percent it previously predicted in September.

The prolonged eurozone debt crisis and lackluster performance of the U.S. economy, the organization said, were the main causes behind the revision.

The IMF also slashed its projections for Korea next year to 3.6 percent from 3.9 percent.

“The move reflects mostly external conditions, such as the situation in the eurozone and the U.S. economy, not to mention that China’s economic growth also has slowed,” said Han Chi-hwan, a researcher at Daewoo Securities.

The U.S. economy grew by a tepid 1.3 percent during the April-June quarter, while China grew at 7.6 percent ― its slowest pace since a financial crisis swept across the globe in 2009.

Meanwhile, the central bank came under fire for issuing projections that reflected too much discrepancy with the forecasts from the IMF and other economic institutes, both at home and overseas.

According to Rep. Lee Han-koo of the Saenuri Party, the gap was caused mostly by the Bank of Korea, which has been issuing unreasonably sanguine predictions.

The practice is irresponsible on the part of the bank, Lee said at the National Assembly’s auditing session, because “it rouses even more uncertainties when such groundlessly optimistic views are made public, not to mention causing actual economic damage by, for example, prompting excessive investment.”

The figures that Lee cited showed an average 2 percent gap between the economic growth forecasts from the Bank of Korea and other organizations.

For this year alone, most local institutions predicted growth rates in the 2-percent range; only the Bank of Korea issued a rate in the 3-percent range.

A 1 percent growth rate generally translates into 70,000 new jobs, between 1.5 trillion won ($1.35 billion) to 2 trillion won in tax revenues and up to a 1.4 percent increase in income, according to financial and policy experts.

The IMF warned that next year’s growth rate also is likely to wane depending on the condition of the global economy. The group anticipated that next year the world economy would grow 3.6 percent, 0.3 percentage point lower than its forecast in July.

There is a 17 percent possibility that world growth will slow to under 2 percent, it said.

By Kim Ji-hyun (jemmie@heraldcorp.com)