S. Korea Economic Outlook Cloudy

South Korea may find it hard to achieve its growth target of 3% this year due to slowing exports and other downside risks in the global market, market watchers said Sunday.

The Bank of Korea held its economic growth forecast at 3% for 2018, the same as that of the International Monetary Fund and the Economic Cooperation and Development, Yonhap reported.

But the local think tanks and some global investment banks recently set their predictions slightly below 3%, as the supercycle for semiconductors, a key economic driver, was expected to near its peak in the latter half of this year.

The strengthening local currency and uncertainties in the oil market were also cited as downside risks for Asia’s fourth-largest economy, which heavily relies on exports.

Leading economic indicators also showed hurdles for the government to achieve its growth target. The latest composite leading indicator compiled by the OCED stood at 99.6, falling below 100 for the third consecutive month. A figure below the benchmark signals economic slowdown.

The CLI figure is designed to provide an early sign of a turning point in the business cycle, indicating fluctuation of economic activity around its long term potential level. It shows short-term economic movements in qualitative rather than quantitative terms.

On Thursday, Bank of Korea Gov. Lee Ju-yeol said the Korean economy faces strong headwinds at home and abroad, citing global uncertainties and rising trade tension between the United States and China.

The country’s job creation remains weak—the number of new jobs in the backbone manufacturing sector declined amid restructuring in the labor-intensive shipping and auto industries. Earlier, the central bank lowered its estimate for job creation to 260,000 from an earlier projection of 300,000.

At the same time, household debt is on a steady rise and surpassed 1,450 trillion won ($1.34 trillion) last year, with numbers continuing to rise.

Also, consumer price inflation has been hovering around 1.5% for months, far lower than the BoK’s target of 2%.

Meanwhile, BoK is expected to freeze its policy rate at the current 1.5% at its upcoming monetary meeting due to low inflation pressure and the sluggish job market, a market watcher said Sunday.

Scheduled to take place Thursday, the seven-member monetary policy panel under the BoK will decide whether to keep or adjust the key rate. The May meeting is the fourth out of eight sessions set for this year.

The BoK has maintained the present level in the previous three sessions since it raised the rate by a quarter percentage point from an all-time low of 1.25% in its final monetary meeting in November last year.