World Economy

S. Korea GDP Growth May Stay Below 3%

S. Korea GDP Growth May Stay Below 3%S. Korea GDP Growth May Stay Below 3%

A major state-controlled think tank forecast Wednesday that South Korea’s economic growth may stay below 3 percent this year due to a continued slump in exports.

In its predictions on the nation’s economy in 2015 and 2016, the Korea Development Institute cited numerous factors domestically and externally, which could pull down the growth potential, particularly this year,  Yonhap reported.

The institute revised its 2015 GDP growth downward to 3 percent from its earlier forecast of 3.5 percent, which is lower than the recent projection of 3.1 percent by the International Monetary Fund as well as the Bank of Korea. Further, it warned that the GDP growth could even be less than 3 percent if the effects from monetary and fiscal policies do not meet expectations and the government-led structural reform ends in a de facto failure.

“If the problem of rapidly mounting household loan is not settled, the effects of the interest rate cut (in March or additionally in the future) would be restricted,” the KDI said in a statement.

It also showed concern that policymakers have not yet attained tangible results in their efforts to overhaul the state pension system, the labor market and other reforms.

The institute said the slowdown in output of the manufacturing industry and the slump in exports have been major hurdles for overall recovery, though the service sector and private consumption have shown mild improvements.

The KDI, nevertheless, predicted the second-half growth would exceed that of the first half. Compared to 2.4 percent growth in the first quarter and the projection of 2.8 percent in the second quarter, it estimated third and fourth quarter growth to reach 2.9 percent and 3.6 percent, respectively.

Private consumption is projected to grow 2.3 percent in 2015, higher than 1.8 percent a year before, it added.

It said, in 2016 the economy and private consumption are forecast to expand 3.1 percent and 2.6 percent, respectively.