Goldman predicts 3% p.a. economic growth in 2020

Home > Business > Economy

print dictionary print

Goldman predicts 3% p.a. economic growth in 2020

The Korean economy is likely to grow at an annual pace of 3 percent from 2020 to 2030 on the back of strong exports and structural reforms, while the benchmark Kospi will climb as high as 3,000 by 2015, Goldman Sachs forecast on Sunday.

“Korea’s per-capita income could more than double to $47,000 by 2020 on sustained income growth and gradual Korean won appreciation,” Goldman Sachs economist Kwon Goo-hoon wrote in the Global Economics Paper, which the investment bank published over the weekend. “Exports could rise to around 80 percent of gross domestic product from 50 percent currently, with China purchasing 35 percent of total exports.”

The report explained that Korea will retain robust growth despite its rapidly aging demographic as post-Korean War baby boomers enter retirement. The fact that the nation’s working-age population is set to decline after 2016 is not expected to unhinge the economy, it suggested.

“While the size of the workforce matters for growth, other factors matter more,” the report said. “We find that this relationship varies greatly by country. In a number of countries, total population mattered more than the labor force, and trends in population and growth often diverged. In this respect, Japan is an outlier rather than a typical example.”

Goldman noted the major drivers of a country’s economic growth are productivity, investment and human capital rather than labor supply.

Given that Korea’s economy is more affected by nondemographic factors, the investment bank predicted the aging of baby boomers is unlikely to be as much of a drag on growth as it was in Japan, as Korea has a number of strong nondemographic factors.

These are its trade openness, coupled with the robust growth in Asia led by China and India; its substantial human resources, which can offset the declining labor force; a large manufacturing base; and ample room for improvement in woman’s labor participation.

Strong and sustained exports will help the Kospi reach 3,000 points by 2015 and 5,000 by 2023, Kwon predicted, as long as “the strong linkages between exports and the Kospi remain unchanged.” Yesterday, the benchmark Kospi closed at 1,997.08, down 1.57 percent from the previous day.

But Goldman warned that Seoul should continue strengthening exports rather than boosting domestic consumption given that the Korean economy is susceptible to a balance-of-payment crisis.



By Kim Mi-ju [mijukim@joongang.co.kr]
Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)