The Korea Development Institute (KDI) adjusted its Korean economic growth forecast for this year from 3.5% to 3.0% on May 20 in view of the likelihood that the stagnation in export will continue although the domestic consumption will show a gradual recovery based on an increasing investment.
“It is predicted that the slowdown of the emerging economies including China and the depreciation of the yen and the euro affecting Korean exporters’ price competitiveness will result in an export increase of no more than 1.1% and 2.9% in 2015 and 2016, respectively,” it explained, adding, “The consumer price is estimated to go up by just 0.5% this year and 1.4% in 2016.”
The KDI also warned that the economic growth rate might dip below 3% unless the government’s restructuring plan and fiscal and monetary policy worked as intended. “The other potential negative factors include the delay of the recovery of the European economy and mounting uncertainties attributable to an interest rate hike in the United States,” it continued.
Earlier on April 9, the Bank of Korea had cut its forecast by 0.3 percentage points to 3.1%. Likewise, the International Monetary Fund (IMF) lowered its estimate from 3.3% to 3.1% last month.