Korean economy to grow some 3% in 2016: economists

The South Korean economy is expected to expand around 3 percent in 2016 from this year unless external uncertainties worsen further, local economists predicted Sunday.

In a survey conducted by Yonhap News Agency, the heads of six major economic think tanks forecast Asia’s fourth-largest economy will grow moderately next year on the back of recovering domestic demand.

Their prediction is slightly lower than the government’s estimate. The finance ministry has predicted Asia’s fourth-largest economy to grow 3.3 percent on-year in 2016, with the Bank of Korea forecasting a growth rate of 3.2 percent.

“The Korean economy will likely grow around 3 percent on-year in 2016,” said Kim Joon-kyung, the state-run Korea Development Institute chief. “How the economy will fare in the first quarter of next year will determine its full-year performance.”

The negative impact of a U.S. interest rate hike will be concentrated in the January-March period of next year because the effect of government stimulus measures is projected to die down starting next year, he said.

In light of that, it is difficult to rule out the possibility that South Korea’s first-quarter growth rate will remain low, the economist added.

Early last week, the Federal Open Market Committee’s October minutes eased market uncertainties by hinting at a rate increase in December.

The economists cited China’s cooling economy as the biggest risk to South Korea’s economy next year.

“South Korean exports to China are likely to decrease next year due to a slowdown in the Chinese economy and its industry shakeout,” said Lee Il-houng, head of the Korea Institute for International Economic Policy. “South Korea’s economic growth will depend more on changes in external conditions.”

China is South Korea’s largest trading partner, accounting for over 25 percent of South Korea’s total exports in 2014.

South Korean exports, the country’s key growth engine, have fallen every month since the beginning of the year, plunging 14.7 percent on-year in August and 8.3 percent last month.

Meanwhile, South Korea’s seven major securities companies predict the country’s economy to grow 2.8 percent in 2016 from this year due mainly to slumping exports. (Yonhap).


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