The Korea Herald


BOK eyes slowdown in 2018 facility investment

By Catherine Chung

Published : July 16, 2017 - 11:59

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Growth of South Korea's corporate capital expenditures is expected to lose steam sharply in 2018 due to this year's big investments by major companies, the central bank said Sunday.

Corporate investment in new plants and equipment is projected to expand 3 percent next year, compared to an estimated 9.5 percent surge for this year, according to the Bank of Korea.

In its latest economic outlook released Thursday, the central bank said the country's capital expenditures probably jumped 14.1 percent in the first half of the year on big investments by chip makers and other tech giants. The growth rate is predicted to drop to 5 percent in the second half.

(Yonhap) (Yonhap)

The forecast for next year's facility investment is similar to BOK's economic growth forecast of 2.9 percent for the coming year, which analysts said means that corporate capital spending would not spearhead the economy's growth.

Market watchers predicted local semiconductor display manufacturers to continue spending big to expand their capacity to catch up with growing demand.

In contrast, oil refiners, chemicals makers and shipbuilders are unlikely to be active in capital spending in the coming year due to unfavorable overseas conditions such as weak crude prices, they added.

The BOK also forecast the country's construction investment to edge up 0.2 percent on-year in 2018, compared to a 6.5-percent on-year gain for 2017, amid concerns over tougher measures to cool the housing market.

"Corporate facility investment is expected to maintain its sharply increased level next year amid a slowdown in growth of construction investment, losing its momentum in leading the economy's growth," said Lee Geun-tae, a senior researcher from the LG Economic Research Institute. (Yonhap)