The Korea Institute for International Economic Policy, an organization affiliated with the Prime Minister’s Office, set the world economic growth rate at 3.5 percent for next year, as compared with 3.7 percent expected this year.
“The global economy, which has been on a recovery trend under the US lead, has surpassed its high point and is now set to slow down,” said Lee Jae-young, president of KIEP, at a conference held jointly with the International Monetary Fund at Lotte Hotel Seoul.
|KIEP President Lee Jae-young (KIEP)|
During the annual event, officials representing both organizations exchanged views on the global economy and the Asian regional economy for next year, while discussing ways to encourage productivity and innovation in an open economy.
Downside risk factors -- global money-tightening actions, escalating trade conflicts and financial vulnerability in emerging economies -- have been weakening the economic virtuous cycle of demand-production-employment, according to KIEP.
“The global economy will slow down further in 2019, marking 3.5 percent growth, down from 3.7 percent this year,” said An Sung-bae, leader of KIEP’s international macroeconomics team.
The figure was slightly lower than that of the IMF, which in October cut its forecast for 2018 and 2019 to 3.7 percent from the previous 3.9 percent.
KIEP’s view is that the economic slowdown will affect most advanced economies too. While the United States and the European Union are expected to grow 2.3 percent and 1.8 percent next year, respectively, Japan is likely to mark only 0.8 percent growth.
Even emerging economies such as China will be held back by persistent downside risks, such as the devaluation of its currency triggered by retrenching policy actions around the globe, An added.
Despite challenges, the Asian region is largely expected to maintain relatively strong growth throughout the rest of this year and next year, according to the IMF.
“Asia is vulnerable to external variables such as monetary policies of advanced economies and global trade conflicts, as well as to the excessive debt in its local private sector,” said Pablo Lopez-Murphy, research head of the IMF’s Asia-Pacific department.
“Nevertheless, the region is capable of responding to these risks on the back of ample foreign exchange reserve and current account surplus.”
The corresponding figure suggested by the Bank of Korea is 2.7 percent, both for this year and next year. A number of private think tanks, along with global credit ratings agency Moody’s, have recently come up with more pessimistic figures for next year, some as low as 2.3 percent.
By Bae Hyun-jung