Rising expectations for 3% growth, GNI per capita of $30,000 next year

Expectations are rising that South Korea may achieve 3 percent on-year growth in nominal gross domestic product and surpass $30,000 in gross national income per capita in 2018, on the back of the strong global economy, experts said Sunday, citing data from financial institutions and think tanks. 

The International Monetary Fund raised the economic outlook of Korea for 2018 to 3 percent in October, up 0.2 percentage point from that of April. On Tuesday, the Organization for Economic Cooperation and Development lifted the 2018 growth projection to 3 percent, up 0.2 percentage point from an estimate in June.

Similar hikes in prospects for next year were seen at local think tanks, such as the Korea Institute for Industrial Economics in Korea and Korea Capital Market Institute last week. These came in line with a remark by Finance Minister Kim Dong-yeon on Monday that Korea’s economy is “certainly” expected to grow on-year by at least 3 percent.

The Bank of Korea has suggested a growth forecast of 2.9 percent since October, while leaving open the possibility that Korea could attain 3 percent economic growth in 2018.

In a press conference held after the Monetary Policy Committee’s meeting Thursday, BOK Gov. Lee Ju-yeol told reporters he expected the growth outlook next year to be “around 3 percent” on the back of the “robust global economy pickup.” On Thursday, the central bank raised the key rate by 0.25 percent to 1.5 percent.

Both the IMF and the OECD forecast the global economy to grow 3.7 percent on-year in 2018, up 0.1 percentage point from this year at 3.6 percent.

According to the BOK, In 2017, Korea will achieve the goal of 3 percent growth in national GDP, unless the country sees its GDP in the fourth quarter decline by over 0.72 percent on-year. The IMF forecast the Korean economy would grow 3.2 percent in 2017.

If the nation’s economy grows over 3 percent for two consecutive years from 2017 as forecast, it would mark the first time in seven years after the national GDP rose 6.5 percent in 2010 and 3.7 percent in 2011.

Such rosy prospects for the national economy, coupled with the strong Korean won against the greenback, are expected to lead the GNI per capita to close in on the $30,000 mark this year.

Since the GNI per capita first surpassed $20,000 in 2006, the figure has been on a gradual increase, but fell short of reaching $30,000. In 2016, the GNI per capita stood at $27,561.

Meanwhile, another report Sunday forecast Korea’s economic momentum to continue until the first half of 2018 and projected economic growth in the second half to drop to mid-2 percent. The report by Hyundai Research Institute cited sluggish investments in building infrastructure, as well as an interest rate hike, oil price surge and the strengthening local currency.

By Son Ji-hyoung 
(consnow@heraldcorp.com)