By Kim Kwang-tae
SEJONG, May 22 (Yonhap) -- South Korea's prestigious state-run think tank on Wednesday slashed its economic growth outlook for the country this year to 2.4 percent from 2.6 percent, becoming the latest in a series of institutions to trim its growth forecast for Asia's fourth-largest economy.
The KDI blamed weak domestic demand and slowing exports for its downward revision.
"Overall, the Korean economy shows signs of sluggishness as export fell amid slowing growth in domestic demand," the KDI said in its latest economic outlook.
The KDI's growth outlook is on par with the Organization for Economic Cooperation and Development's (OECD) latest economic projection of 2.4 percent.
On Tuesday, the OECD said economic growth is projected to slow to around 2.5 percent in 2019-20, citing weakness in domestic demand and international trade.
Asia's fourth-largest economy expanded 2.7 percent in 2018, down from a solid 3.1 percent the previous year.
South Korea's exports fell 2 percent on-year to US$48.86 billion in April, extending their on-year decline for the fifth consecutive month due to a protracted slump in chips and weak demand from China, which accounts for a quarter of its exports.
The KDI said the escalating trade frictions between the United States and China would have a negative effect on the South Korean economy. The U.S. and China account for a combined 40 percent of South Korea's exports.
The U.S. has raised its import tariffs to 25 percent from 10 percent on $200 billion worth of Chinese products. In a tit-for-tat response, China has announced that it will levy higher tariffs on $60 billion worth of U.S. goods.
The KDI said the timing and scope of a recovery in the semiconductor sector could also have an effect on the economy. South Korea accounted for more than 60 percent of the global memory market in 2018.
In April, the Bank of Korea trimmed its economic outlook for the South Korean economy to 2.5 percent from 2.6 percent, citing a sharper-than-expected slump in exports and facility investment.
In March, Moody's Investors Service revised down its growth outlook for South Korea's economy this year to 2.1 percent, citing a weakening of the investment cycle and deceleration in global trade as well as subdued demand for intermediate products from China.
Still, Hong Nam-ki, the minister of economy and finance, said earlier this month that the government has no plan to adjust the country's economic growth target.
South Korea's finance ministry has projected the nation's economy to expand between 2.6 percent and 2.7 percent this year.
The KDI recommended the government seek an expansionary fiscal and monetary policy to secure economic stability by preemptively responding to weak demand at home and abroad.
The Bank of Korea said earlier this month that it will maintain its accommodative monetary policy.
The South Korean central bank increased its main policy rate by 25 basis points to 1.75 percent in November 2018 and has kept it on hold since.
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