Anchor: The government has slashed its economic growth outlook for next year to one-point-six percent, citing persistent internal and external challenges to Asia’s fourth-largest economy. Inflation will remain well above three percent next year, the government predicted, potentially complicating and restricting measures to revitalize growth. The dismal outlook came as the export-driven economy is expected to post its first current account deficit in 14 years.
Moon Gwang-lip has more.  

Report: The government says the nation’s economy will lose steam next year, with growth slowing to one-point-six percent, bogged down by a global recession.

The official 2023 economic policy direction released by the finance ministry on Wednesday outlined the grim economic forecast by the government.

The revised figure is zero-point-nine percentage points lower than the previous government outlook announced in June and gloomier than those by the Korea Development Institute(KDI) and the Bank of Korea. The two agencies earlier predicted growth of one-point-eight percent and one-point-seven percent, respectively.

There have only been five instances in modern Korean history where the nation’s growth dipped below two percent, the latest of which was in 2020 when the economy contracted zero-point-seven percent due to the pandemic. It then turned around and posted growth of four-point-one percent last year.

The policy direction document said sluggish trade and high interest rates will impede recovery next year in areas such as exports and domestic demand.

First vice finance minister Bang Ki-sun noted challenges at home and abroad for Asia’s fourth-largest economy, with growth sharply decelerating in the first half of the year.

He said a slowdown in the real economy, including exports, is more pronounced due to a sluggish global market and a stagnant semiconductor sector, adding that the economic climate will gradually improve toward the second half of next year.

Korea Customs Service data on Wednesday showed that the annual cumulative trade deficit for the first 20 days of December hit a record high for the period at 48-point-nine billion dollars, putting the nation on course to post its first annual deficit since the global financial crisis in 2008.

Vice minister Bang said the government’s dim outlook for the economy reflected the latest monthly industrial production figure, which was not factored into the BOK and KDI figures. According to Statistics Korea late last month, industrial output fell one-point-five percent in October from a month earlier, marking the biggest drop in 30 months. Consumption also declined for the second consecutive month with waning investment.

For this year’s growth, the ministry also cut its outlook by zero-point-one percentage point to two-point-five percent.

The government, meanwhile, expects that inflation next year will grow three-point-five percent, down from five-point-one percent this year.
Moon Gwang-lip, KBS World Radio News.