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OECD cuts S. Korea's 2017 growth outlook to 3 pct from 3.6 pct

All News 17:30 June 01, 2016

SEJONG, June 1 (Yonhap) -- The Organization for Economic Cooperation and Development (OECD) on Wednesday cut its 2017 growth forecast for the South Korean economy to 3 percent from 3.6 percent, citing sluggish global trade and a slowdown in China.

In its earlier forecast released in November last year, the OECD had expected that South Korea would pull off a 3.6 percent growth next year.

"Output growth is projected to reach 3 percent in 2017," said the biannual OECD Economic Outlook. "Given Korea's reliance on export-led growth, a delayed rebound in world trade is the biggest risk to the sustained expansion. In particular, a sharper-than-expected slowdown in China would be very detrimental to Korea."

The OECD report noted that a long-protracted slump in world trade will weigh heavily on Asia's fourth-largest economy, whose exports account for nearly 40 percent of its gross domestic product (GDP).

South Korea's outbound shipments fell for a record 17 months in a row amid low oil prices and contracted world demand, with the latest May figure declining 6 percent.

The Paris-based organization slashed its outlook of next year's global trade to 3.2 percent from 4.8 percent, while the world economy is anticipated to expand 3.3 percent next year, down from OECD's growth forecast.

"Global financial market turbulence in the context of diverging monetary policy stances and weakness in emerging market economies also pose downside risks," the report added.

But the OECD said effective structural reform in the country's labor and business sectors will give a boost to the economy and help expand further.

"On the upside, Korea's strong external position provides a buffer against shocks and effective structural reforms could reignite domestic demand and reverse the decline in export performance," it said.

At the same time, the latest OECD study said South Korea will grow 2.7 percent in 2016, a downgrade from its earlier estimate of 3.1 percent, citing sluggish global trade and a slowdown in China.

The South Korean government, however, has been adhering to its growth target of 3.1 percent, although the country's top economic policymaker gave slight hints at a possible downgrade.


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