Korea will see the protracted economic slowdown continue next year amid tardy recovery in the global economy, a state-controlled research institute predicted Sunday.
In its report, the Korea Development Institute revised its projection on the nation’s gross domestic product growth for 2013 down to 3 percent, from its earlier estimate of 3.4 percent.
The think tank also forecast that the 2012 GDP growth would stay at 2.2 percent, compared with its earlier estimate of 2.5 percent.
The KDI’s projection figures fall short of Korea’s “potential growth rate” of 3.7 percent, which was formerly calculated by public organizations at home and abroad.
As the nation’s GDP growth began marking below the 3.7 percent in 2011, the KDI’s outlook suggests that Korea has faced an era of low growth rate due to a variety of unfavorable factors.
The institute also projected that the pace of recovery will be quite gradual next year ― 2.2 percent on a year-on-year basis during the first half and 3.7 percent in the second half.
As a remedy to boost the economy, the KDI advised policymakers to expand fiscal spending in consultation with the National Assembly and slash the benchmark interest rate.
KDI’s gloomy outlook is expected to lead the Finance Ministry to also revise down its 2013 projections.
While the government had forecast the economy will grow by 4 percent next year, Finance Minister Bahk Jae-wan recently hinted at the possibility of revising down the earlier estimate in the coming weeks.
The KDI had been continuously more upbeat than other economy watchers under the consistent growth-first Lee administration.
The gloomier view on the recovery underlines the disastrous vortex of declining exports, collapsing consumption and decaying family finances facing the country as its people prepare to elect a new president.
The impact of lower growth will be most acutely felt in the job market. According to one estimate, a drop of 1.1 percentage point in GDP growth would mean 80,000 fewer new jobs ― a serious setback for the administration, which has repeatedly promised to give top priority to job creation.
The U.S.-based International Monetary Fund had expected 3.6 percent growth in Korea’s 2013 economy, with Hyundai Economic Research Institute forecasting 3.5 percent.
While the Bank of Korea (3.2 percent), LG Economic Research Institute (3.3 percent) and many others predicted a low 3 percent range, the projection by the Korea Institute of Finance stayed at 2.8 percent.
By Kim Yon-se (firstname.lastname@example.org)