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S. Korea's growth to hit 2.5 pct, exports to grow 0.7 pct in 2019: think tank

All Headlines 14:14 March 31, 2019

SEOUL, March 31 (Yonhap) -- South Korea's economic growth will reach 2.5 percent on-year in 2019, with outbound shipments likely to gain 0.7 percent, a leading private think tank said Sunday.

According to Hyundai Research Institute's (HRI) revised economic forecast report, Asia fourth-largest economy will face strong headwinds this year in the form of sluggish global growth and declining domestic investment.

The estimate is unchanged from HRI's prediction in December, but lower than 2.6-2.7 percent growth being pushed by the government and the 2.6-percent figure outlined by the Bank of Korea, International Monetary Fund, Organization for Economic Cooperation and Development and state-run Korea Development Institute.

S. Korea's growth to hit 2.5 pct, exports to grow 0.7 pct in 2019: think tank - 1

It is on par with estimates by LG Economic Research Institute and slightly higher than 2.4 percent growth forwarded by Korea Economic Research Institute.

HRI said there will be downward pressure in the form of weakening exports and imports with consumption and investment likely to take a hit. It adjusted export growth from 3.7 percent, with the import prediction being downgraded from 4.6 percent to just 0.2 percent for the year.

The institute said exports to China, South Korea's largest overseas market, will be hurt, especially with semiconductor export to contract vis-a-vis 2018.

The World Semiconductor Trade Statistics Inc. predicted that global chip sales will fall 3 percent on-year.

The economic institute then said that while overall conditions are not favorable, domestic consumption may reach 2.5 percent, 0.1 percentage point higher than its estimate from late last year.

"Higher incomes for wage earners, stability in the real estate market and expansionary fiscal policy stance will all contribute to consumer spending," HRI said. It said labor market improvements will only happen slowly.

On construction, the latest findings showed investment falling 4.2 percent with facility-related injection of funds to edge up 0.3 percent. Both these numbers are down from earlier predictions.

On the all important job market, some 125,000 posts may be created this year, up from 97,000 in 2018, with unemployment standing unchanged from the year before at 3.8 percent.

Consumer prices are forecast to rise 1.3 percent, slightly below 1.5 percent tallied for last year.

"Under such challenging conditions, efforts need to be made to prevent slow growth from becoming chronic," the HRI said.

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It said the government needs to front-load social overhead capital spending in the first half to help the construction sector, with the semiconductor sector needing to do more to move forward with innovation.

On trade, the think tank pointed out that if the current U.S.-China trade frictions continue, South Korea will need to brace for a drop in exports to its large neighbor, which is its largest trading partner.

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