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IMF cuts S. Korea's 2016 growth forecast to 2.7 pct

All News 22:03 April 12, 2016

SEJONG, April 12 (Yonhap) -- The International Monetary Fund (IMF) on Wednesday lowered its forecast for South Korea's economic growth this year to 2.7 percent, as a slowdown in China has weighed heavily on Asia's fourth-largest economy.

The latest forecast is sharply down from the 3.2 percent growth the agency forecast in its World Economic Outlook report published in October last year.

The IMF's growth forecast is far lower than the South Korean government's 3.1 percent and the Bank of Korea's 3 percent.

"Among other advanced economies in Asia, the downturn in China's imports in 2015 has been an important drag," the agency said in its April report.

China is South Korea's biggest trade partner, with its exports to China accounting for more than a quarter of the country's entire outbound shipments.

The slowdown in the world's second-largest economy has weighed heavily on South Korea's exports, as shipments to China have been on a steady decline since last year.

The IMF expected South Korea's consumer price index to reach 1.3 percent in 2016, up from 0.7 percent tallied last year.

The agency said South Korea will face some downside risks including a sudden capital outflow stemming from emerging markets and a change in China's economic growth policy.

It warned the country of the economic effects of aging, saying that "Population aging is increasingly weighing on potential growth in these economies, most notably in Korea and Singapore."

The Washington-based organization downgraded its 2016 growth forecast of the world economy to 3.2 percent this year from its January's forecast of 3.4 percent.

It also cut the growth outlooks of the United States and the European Union by 0.2 percentage points each to 2.4 percent and 1.5 percent, respectively.

However, the Chinese economy is expected to expand 6.5 percent this year, up 0.2 percentage points from its earlier forecast.

For next year, the agency also slashed South Korea's growth forecast to 2.9 percent from 3.2 percent, with the world economy projected to gain 3.5 percent.


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