3% GDP Growth Forecast for This Year open the window of AOD

Write : 2018-03-25


The National Assembly Budget Office has forecast that South Korea's real gross domestic product(GDP) will grow three percent this year.
In its economic outlook report for 2018 issued Monday, the office said that steady exports and rising private consumption will be the factors leading economic growth.
The report projected that exports will continue solid growth this year backed by global economic recovery increasing import demand, and predicted annual growth of over six percent in outbound shipments.
The report says private spending will also increase thanks to government measures and improvements in household income and consumer sentiment.
Facility investment is expected to continue a recovery momentum but its growth rate will likely slow due to a base effect from last year's steep growth.
Also, investment in construction will be reined in following government measures to stabilize the housing market and reduced budget for social overhead capital.
Regarding jobs, the budget office expects an increase of 300-thousand people in the number of employed.
Inflation growth this year is predicted at 1.7%, lower than last year's 1.9. The reduction is attributed to a slower increase in oil prices and stable supply of agricultural and livestock produce and fishery goods.
The nation's current account surplus is forecast at 74 billion dollars, which is down from last year.
These projections issued by the Assembly Budget Office are identical with those forecast by the government, the Bank of Korea, the International Monetary Fund and the Organisation for Economic Cooperation and Development(OECD).
But the figures are higher than projections provided by some state-run and private think tanks in the country.
The Korea Development Institute forecasts GDP growth of 2.9% this year while the LG Economic Research Institute and the Hyundai Research Institute expect the economy to grow 2.8% this year.
The Hyundai institute said that geopolitical risks have eased but other risks related to household debt and a possible trade war linger on.
The North Korea crisis which escalated up until late last year has sharply eased in recent days amid inter-Korean dialogue and prospects of talks between North Korea and the U.S.
It is certain these developments will have a positive effect on the consumer and investor sentiment.
But at the same time, eased geopolitical risks will appreciate the value of the South Korean won which can slow down export growth and adversely affect economic recovery.
Export growth is also likely to weaken due to the global war on tariffs stemming from trade protectionism.
South Korea's household debt is still a huge burden on the economy as it can contract spending.
All in all, the Korean economy in 2018 is expected to grow just about three percent against the backdrop of a mix of favorable conditions and risk factors.
Also some worry the effects of income-led growth policies and artificial employment expansion will only last in the short term, and are urging measures to boost corporate vitality that can lead to job creation.

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