Foreign IBs see slowdown in Korea's 2018 growth

By Catherine Chung
  • Published : Aug 7, 2017 - 14:19
  • Updated : Aug 7, 2017 - 14:19
Foreign investment banks predict the South Korean economy to lose momentum slightly in 2018 after posting solid growth this year, a report showed Monday.

According to the report by the Korea Center for International Finance, Barclays, JP Morgan, Goldman Sachs, Nomura and five other foreign IBs forecast the economy to grow at an average rate of 2.8 percent in 2017 on robust exports and facility investment as of end-July.

But Asia's fourth-largest economy will likely lose growth momentum slightly next year, expanding at an annualized rate of 2.6 percent.


Barclays projected South Korea's growth rate to slow to 2.7 percent in the coming year from 2.9 percent this year.

JP Morgan made the same estimate, and Goldman Sachs expected the Korean economy to gain 2.5 percent in 2018, compared with a 2.8 percent expansion this year.

Nomura estimated South Korea's economic growth would sink to 2.3 percent for 2018 from this year's 2.7 percent.

In contrast, BoA Merrill Lynch forecast the Korean economy to expand 2.9 percent this year, with the growth rate edging up to 3 percent in the coming year.

Foreign IBs' growth outlooks are different from the latest outlook made by the Bank of Korea.

In its second-half economic outlook released in July, the central bank predicted the Korean economy to expand 3 percent on-year in 2018 after growing 2.9 percent this year, saying growth of private consumption will gather ground next year amid a continued recovery in the world economy.

Meanwhile, the foreign IBs expected the BOK to carry out an interest rate hike once during the first half of next year.

The BOK may conduct a rate increase in the first quarter of next year as South Korea's supplementary budget and other factors will likely drive up inflationary pressure, Barclays predicted.

In late July, South Korea's National Assembly passed an 11.03 trillion-won ($9.8 billion) supplementary budget bill that President Moon Jae-in has billed as a vital tool to create jobs and spur economic growth.

In a July 13 rate-setting meeting, BOK's monetary policy board unanimously voted to leave the benchmark interest rate steady at 1.25 percent for the month, extending its wait-and-see approach for the 13th consecutive month. (Yonhap)