World Economy

Economists Cautious About South Korea in 2018

Economists Cautious About South Korea in 2018Economists Cautious About South Korea in 2018

The South Korean economy may be decoupled from robust global economic recovery next year, held back by a slump in domestic demand and uncertainties in external conditions, local economists say.

The International Monetary Fund recently revised up its global economic growth outlook for next year from 3.6% to 3.7%, while forecasting the world economy would expand 3.6% this year, Yonhap reported.

Emerging market economies were projected to grow 4.9% on average in 2018, up from the 4.6% estimated for 2017. In contrast, local private research institutes have put forward a cautious outlook for the Korean economy.

Economists from the Korea Economic Research Institute and the LG Economic Research Institute said in a seminar this week that Asia’s fourth-largest economy was expected to grow in the mid-2% range next year, slowing down from the over 3% estimated for this year.

In reports released earlier, the Hyundai Research Institute and a think tank affiliated with the Industrial Bank of Korea put the 2018 growth rate at 2.5% and 2.7%, respectively.

Last week, the Bank of Korea said the country’s gross domestic product would expand 3.1% this year, even if it recorded zero growth in the fourth quarter of the year. This prediction followed an announcement by the central bank that the economy grew 1.4% from the previous three months in the July-September period, nearly double market expectations. The corresponding figures stood at 1.1% and 0.6%, respectively, in the first and second quarters.

Economists say 2018 will be an “unstable” year for the Korean economy, citing downside risks at home and abroad. Possible interest rate hikes coupled with measures to curb rising home prices are expected to further weaken domestic demand.

Private consumption increased 0.7% on-quarter in the July-September period, slowing down from 1% in the previous quarter. Its contribution to GDP growth also dropped from 1.5 percentage points to 0.5 percentage points over the cited period.

Meanwhile, the jobless rate fell to the lowest level in 10 months but the situation is worsening for young people. The youth unemployment rate rose to its highest level in 18 years in October.

The youth unemployment rate for those aged between 15 and 29 recorded 8.6%, up from 8.5% a year ago, and the highest October figure since 1999. The de-facto jobless rate for young people soared from 21.1% to 21.7%.



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