The South Korean economy is expected to grow 2.6 percent in 2016 from this year amid a prolonged slump in exports and weak consumer spending, a major private think tank said Tuesday.
The forecast by the Korea Economic Research Institute is grimmer than the government’s prediction of 3.1 percent and the Bank of Korea’s 3.2 percent projection.
In its latest economic outlook, the think tank said the local economy “is forecast to show an L-shaped trajectory by logging a mere 2.6-percent expansion following this year’s 2.5-percent growth due to sluggish exports and few options on hand for the government to boost domestic consumption.”
The think tank forecast exports to grow a mere 0.9 percent in 2016 from this year due to the cooling Chinese economy and the possible aftermath of the U.S. interest rate hike. China is the largest export market for South Korea, which relies heavily on overseas shipments for its economic growth.
It also projected South Korea will post a current account surplus of $93.6 billion in 2016 from this year’s $101.1 billion.
“Companies are required to explore ways to expand their presence in the Chinese market while investing more into research and development and speeding up their restructuring efforts,” the KERI said, noting that such internal factors as firms’ structural flaws have weakened corporate competitiveness in the global market to hurt exports.
In the coming year, private spending is expected to pick up to 1.9 percent on-year, and the consumer inflation rate could rise to 1.5 percent, according to the think tank. (Yonhap)