The International Monetary Fund and several foreign investment banks including Citigroup have expressed skepticism over South Korea’s economic outlook, citing growing uncertainties that might pull down the nation’s growth in the coming months.
In contrast, data from the Organization for Economic Cooperation and Development was more positive.
The split projections from the two major global organizations ― the IMF and OECD ― are drawing closer attention to local policymakers’ decisions in the coming months, including the Bank of Korea’s monthly rate-setting, slated for this Friday.
The Korean Finance Ministry has not downplayed the research report from the IMF, and rather positively commented on its proposal.
Deputy Prime Minister and Finance Minister Choi Kyung-hwan on Thursday somewhat shared the view of the IMF, which has lowered its outlook on Korea’s GDP growth, and hinted at continuing expansionary fiscal policy to simulate the still weak sentiment and indices.
Earlier in the day, the Washington, D.C.-based institute lowered its projection on Korea’s yearly economic growth to 3.1 percent. It has continued to revise its 2015 outlook on the nation downward from the initial 4 percent last October to 3.7 percent in February, and again to 3.3 percent in April.
Risks include “slower-than-expected growth of Korea’s main trading partners, the impact of a persistently weak Japanese yen on Korean export industries and side effects from the global financial conditions,” said the IMF.
Minister Choi told reporters that his opinion is somewhat similar to that of the IMF, saying that “the government is planning an expansionary policy, as suggested by the IMF, until the (steady) recovery pace is confirmed.”
U.S.-based investment bank Bank of America-ML has also cut its forecast on Korea’s 2015 growth ― from 3.1 percent to 3 percent, citing the slump in exports in the wake of the economic slowdown in China and the United States.
Citigroup predicted private consumption to recover, but cited problematic factors such as weak global demand and uncertainty over the result of the Korean government’s possible additional fiscal expansion.
Nomura Securities cited the worsening financial market situation from weak economic indices and rise in bond rates for a factor to restrict the future growth momentum.
The OECD, however, on Thursday publicized an index suggesting that the nation’s economy would see a bounce-back in the second half.
Its data showed that the composite leading indicator for South Korea reached 102 in March, marking the highest in nearly four years since it posted 102.1 in April 2010.
A reading above 100 of the CLI means an economy is expanding. The index projects economic conditions six to nine months ahead.
By Kim Yon-se (kys@heraldcorp.com)
