SEJONG -- South Korea’s economic growth is projected to fall behind that of the US this year, according to outlooks from global investment banks and international organizations.
Most of them have predicted that Korea’s 2019 gross domestic product growth will stay at about 2 percent or under on-year, and some researchers at home and abroad are further expecting the gloomy situation to continue in 2020.
Fitch Ratings, J.P. Morgan and Barclays have forecast 2.3 percent growth for South Korea next year, while HSBC, Goldman Sachs and Credit Suisse suggested 2.2 percent.
Moody’s Investors Service and Nomura were more pessimistic, as both predicted 2.1 percent. Further, the outlook on the 2020 Korean economy from Citigroup and UBS stayed at 2 percent and 1.9 percent, respectively, in GDP expansion.
President Moon Jae-in talks with some members of the Cabinet -- Finance Minister Hong Nam-ki (second from right) and Education Minister Yoo Eun-hae (right) -- during a coffee break at Cheong Wa Dae on Oct. 8. Seoul Mayor Park Won-soon (second from left), as an attendee, also participates in the Cabinet meeting. (Yonhap)
BofA Securities, the brokerage unit of Bank of America that had set its outlook on the 2019 Korean growth at 1.8 percent, expects the nation’s growth to be further sagging next year. Its estimate for 2020 is 1.6 percent.
Among local researchers, Korea Investment & Securities and LG Economic Research Institute forecast a 1.8 percent expansion for next year.
The International Monetary Fund predicted 2.2 percent growth for Korea in its October outlook on major economies in 2020, while it suggested a 3.4 percent growth for the global economy on average.
The Organization for Economic Cooperation and Development and the Asian Development Bank have anticipated relatively high growth estimates of 2.3 percent and 2.4 percent, respectively. These estimates for Korea in 2020 stay above their figures for this year.
While few foreign investment banks and organizations suggested growth of 2.5 percent or over, the 2020 projections unveiled by the Ministry of Economy and Finance and the Bank of Korea have reached 2.6 percent and 2.5 percent.
On Monday, Finance Minister Hong Nam-ki told reporters that the government will spur full-fledged efforts to attain growth, which would exceed -- or at least equal -- forecasts from major organizations including the IMF and OECD.
His remarks suggest that the government has the goal of achieving at least 2.2-2.3 percent or more in 2020 economic growth, given 2.2 percent from the IMF and 2.3 percent from the OECD.
Officials from the Finance Ministry and BOK have been upbeat on economic conditions for next year. They asserted that 2020 indices would improve over 2019 when exports have endured an extreme slump throughout the year.
On the contrary, LG Economic Research Institute said that “local manufacturers’ lackluster situation will continue next year as the dull international trades are going on, which could dent the semiconductor industry.”
It also commented on the decrease in working-age population, saying that the reduction speed will be faster next year, which would have a negative effect on private consumption domestically.
(Graphic by Kim Sun-young/The Korea Herald)
Concerning the government’s expansionary fiscal policy to reinvigorate the economy, the institute refuted the opinion. “Enterprises do not have capacity to conduct pay raises for employees (which would benefit consumption) as they are suffering falls in profitability,” it pointed out.
Hyundai Research Institute, in its October report on economic issues at home and abroad, also forecast that the nation could see the GDP growth fall below 2 percent next year.
It said that “a rebound in exports and investments could be restricted because both global and Korean manufacturing are sagging,” adding that the frozen sentiment in the real estate sector is another negative factor.
But the Finance Ministry is pinning hopes on a bounce-back in the sentiment for the semiconductor. In its recent publication, officials from the ministry cited the database from World Semiconductor Trade Statistics.
WSTS expects that global sales of semiconductors will grow 4.8 percent in 2020, turning from an estimated negative growth of 13.3 percent in 2019.
The Moon Jae-in administration has been criticized for wasting taxpayer money by pouring a large portion of the state budget into some social sectors, which is estimated to have not contributed to GDP growth.
As another argumentative policy in a similar vein, from next year the administration will pay 3 million won ($2,580) over a six-month period -- or 500,000 won a month -- to a certain portion of unemployed people aged 18-64 after assessing their household income levels.
The government has argued that the purpose of the support is to assist the recipients’ job-seeking activities.
By Kim Yon-se (email@example.com)