Recent forecasts on Korea’s economic outlook by private research institutes at home and abroad have been overly pessimistic. Most argue that the export-driven nation could face a low-growth era from external uncertainties.
But some local analysts and government officials downplay the skepticism, saying the economy has already hit the bottom in the first half of the year, and things will only get better.
According to the Korea Center for International Finance, more and more foreign investment banks have forecast that Korea would see the 2015 gross domestic product growth stay below 2.5 percent.
In that scenario, it would mark the lowest growth rate in six years since it dipped to 0.7 percent in 2009, when the 2008-09 global financial crisis hit the nation.
Four IBs ― Wells Fargo, Nomura Holdings, IHS Economics & Country Risk and the Australia and New Zealand Banking Group ― said Korea is projected to post a 2.2 percent growth this year.
While some others, including the U.S.-based Moody’s and Morgan Stanley, expected 2.3 percent growth, Germany’s DekaBank said it could stay at 2.1 percent.
Morgan Stanley claimed that the growth engine of exports has slowed down, predicting the slump will continue for a longer-than-expected period.
The collective outlook of 36 foreign IBs on Korea’s growth for this year is estimated at 2.5 percent on average.
Local think tanks have also issued concerns about the nation’s growth potential for the next decade.
LG Economic Research Institute said its growth potential between 2020 and 2030 would stay at 1.7 percent per annum. It has continued to lower the figure ― from 4.6 percent in the early 2000s, 3.6 percent between 2010 and 2014 and 2.5 percent between 2015 and 2019.
An economist from Hyundai Economic Research Institute said “the growth potential has already dropped to the 2 percent level and may further sink lower as time goes on.”
These predictions are somewhat contradictory to the recent upgrade of Korea’s sovereign rating by Standard & Poor’s
President Park Geun-hye, in her meeting with senior secretaries Monday, cited South Korea’s growth rate in 2014 which was the fourth highest among the 34 members of the Organization for Economic Cooperation and Development.
Mentioning the S&P’s credit rating, Park said, “Our performance holds significance as some major countries including Japan underwent downgrades in sovereign ratings.”
She also stressed that the nation’s export ranking climbed to the world’s sixth last year, up by one notch, despite unfavorable the business environment due to the slowdown in Chinese economy.
Some analysts at local brokerages say there is no need to be swayed by mounting pessimism.
They also shared the view that the two core uncertainties ― the likelihood of a U.S. interest rate hike and China’s volatile situation ― could hamper Korea’s growth in the mid-term.
“European investors started to buy local stocks, shifting from their selling streak for the past two months,” said a local securities firm official.
“While the majority of foreign investors are still taking a wait-and-see attitude as the U.S. Fed delayed a potential rate hike in its September meeting, a basic point is the robust fundamentals of Korean companies including exporters,” he said.
By Kim Yon-se (kys@heraldcorp.com)
