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OECD cuts 2019 GDP growth estimate again

May 22,2019
Another red flag was raised on the Korean economy, this time with the Organization for Economic Cooperation and Development (OECD) reducing its 2019 growth forecast to 2.4 percent from 2.6 percent.

It is the latest in a series of institutions, local and international, to lower their estimates for the year, as the economic outlook worsens on weak domestic demand and trouble in export markets.

The OECD’s 2.6 percent figure was a downgrade in March from the 2.8 percent forecast published in November 2018. It is projecting next year’s growth at 2.5 percent.

Shrinking exports resulting from slowing global trade as well as the withering of investment and employment due to restructuring in manufacturing were cited by the international organization.

It noted that Korea’s economy will begin to see recovery in 2020 as a result of expansionary fiscal policies and recovery in investment.

The Finance Ministry said that the lowered outlook was the result of worsening external conditions, including the trade dispute between the United States and China, and investment and export struggles in the first quarter.

The government said it will push forward measures to revitalize the economy, including the swift passing of the supplementary budget at the National Assembly.

The international organization’s revised outlook was released the day before the Korea Development Institute announces its own forecast.

The OECD is not the only institution that has been lowering its forecast, with a series of revisions coming out over the past few months.

Moody’s is most pessimistic, projecting in March that the Korean economy will growth 2.1 percent, down from an earlier 2.3 percent. Others have followed suit, including Korea Economic Research Institute (KERI) and S&P, which lowered its projection from 2.5 percent to 2.4 percent. The Bank of Korea lowered its outlook from 2.6 percent to 2.4 percent.

LG Economic Research Institute last month lowered its growth projection from 2.5 percent to 2.3 percent.

Statistics suggest more gloom.

The OECD revised outlook was released on the same day that the Korea Custom Services reported exports declining 11.7 percent in the first 20 days of this month compared to the same period a year ago. Imports only dipped 0.1 percent. Exports are down 13.5 percent when compared to the first 20 days of April.

The biggest contributors to the decline were semiconductors and China, the same factors cited in recent months.

Korea’s computer chip exports plummeted 33 percent in the first 20 days in May year on year, while exports of automobiles and ships, which were struggling previously, increased 12.6 percent and 21.4 percent, respectively. Semiconductors account for roughly 20 percent of all Korean goods exports. Exports to China declined 15.9 percent. Exports to other major trading partners also declined. Exports to the United States fell 4.4 percent, while exports to the EU dropped 19.4 percent. Exports to Japan retreated 1.4 percent.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]


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