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Parliament think tank marks down economic growth estimates for 2019

All Headlines 09:16 April 03, 2019

SEOUL, April 3 (Yonhap) -- The National Assembly's fiscal think tank expects South Korea's economy to grow 2.5 percent this year, its report showed Wednesday, a lower number compared with what is being forecast by the government and international organizations.

The National Assembly Budget Office (NABO) also predicted a 1.2 percent minus growth in exports (customs clearance basis), a bigger contraction than the slowdown in domestic consumption.

The latest economic outlook report from the office lowered this year's estimated growth by 0.2 percentage point from what was presented in October last year. It is 0.2 percentage point less than the country's 2.7 percent expansion tallied last year.

The economic growth expectation by the government is 2.6 to 2.7 percent. The corresponding figure from the Bank of Korea is 2.6 percent, which is the same figure given by the International Monetary Fund and the Organization for Economic Cooperation and Development.

NABO's estimate is the same as that from private think tanks.

Parliament think tank marks down economic growth estimates for 2019 - 1

"External economic circumstances have turned more worse than anticipated as global economic growth dulled starting at the end of last year from the U.S-China trade war, uncertainties surrounding Brexit and other factors," a NABO official said. "The slowdown in the economic uptick in the eurozone is especially clear, and local demand and exports appear to be influenced by the U.S.-China friction."

In other estimates, the office said this year's exports will show negative growth, a reversal from the October expectation of a 2.4 percent gain.

Total exports based on volume will likely increase 2.9 percent instead of the 3.2 percent estimate given earlier, the report said. One of the causes would be the big dip in the price of semiconductors and their shipments, it said.

Local demand was also seen as shrinking, down from the earlier estate of 2.7 percent to 2.6 percent. Expectations for facilities investment were also brought down to 1.9 percent from 2.3 percent. The minus growth for construction investment widened from the earlier expectation of 2.4 percent to 3.5 percent.

As exports contract more than domestic consumption, the contribution of trade to economic growth will diminish to 0.4 percentage point this year from 1.2 percentage points last year, according to the report. On the other hand, local demand will likely contribute 2.1 percentage points this year, up from 1.6 percentage points in the year before.

The nominal economic growth rate, which reflects inflation, will mark 3.5 percent this year, higher than last year's 3 percent, but will be lower than the average 4.5 percent over the past five years, the NABO report said.

The estimate for new employment was adjusted down from 200,000 to 120,000, while the increase rate in consumer prices was lowered from 1.8 percent to 1.3 percent.

"We see chip prices and external conditions improve in the latter half of this year for South Korea's economy after an adjustment period in the first half," the NABO official said. "If outside-driven risk factors linger or get worse, then there is a high change that the economic expansion will fall under 2.5 percent."

Parliament think tank marks down economic growth estimates for 2019 - 2


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