SEJONG (Yonhap News) ― South Korea’s economy is expected to grow 2.6 percent this year, a state-run think tank forecast Thursday, revising down its growth outlook amid increasing uncertainty facing the country at home and abroad.
The growth estimate by the Korea Development Institute is lower than the 3 percent it predicted in November. The think tank also expected the country’s economy will grow 3.6 percent next year.
“The economy will make a steady improvement in 2013 and log a relatively low 2.6 percent growth in 2013. In 2014, however, the global recovery could drive up exports and domestic demand is also expected to continue its improvement, raising the growth rate to 3.6 percent,” the KDI said.
Concerns are rising that South Korea’s economy might be losing its traction. South Korea’s gross domestic product grew less than 1 percent on-quarter for the eighth straight quarter. The economy grew 2 percent in 2012, the slowest gain in three years.
Recently, the National Assembly approved a 17.3 trillion won ($15.4 billion) extra budget weeks after the government drafted the proposal to jump-start the slowing economy.
Ahead of the approval of the supplementary budget, the government slashed its 2013 growth outlook sharply from 3 percent to 2.3 percent.
The KDI cited a possibly deepening economic slump in the eurozone due to fiscal tightening and a slowdown in the United States as risk factors that could weigh further on South Korea’s export-driven economy.
Exports, which make up about a half of the country’s economy, are expected to grow 2.9 percent on-year in 2013, which is an improvement from a 0.1 percent gain tallied a year before. Imports will grow 2.2 percent, the KDI said.
The current account balance, a broad measure of trade and investment flows, is also expected to post a surplus of around $39.7 billion this year, up from November’s forecast of $30.4 billion.
The KDI, however, revised down its private consumption growth outlook from 2.7 percent to 2.3 percent.
It also lowered its growth forecast for corporate capital investment from 5.3 percent to 2.4 percent.
South Korea’s consumer inflation will likely stabilize at 1.8 percent this year, which is lower than the think tank’s earlier prediction of 2.3 percent. The KDI expected that the country’s jobless rate will stand at 3.3 percent compared with 3.2 percent it forecast in November.
