Indicators show rocky road ahead through 2013
The negative outlook throws cold water on the International Monetary Fund’s estimate 3.6 percent growth for the Korean economy next year. It almost tracks the OECD’s forecast of 3.1 percent.
“With no sight of a global recovery, the domestic economy will be affected by lingering external uncertainties, which will put the brakes on growth at least until the end of the first quarter,” said Choi Sang-mok, executive director for economic policy at the Ministry of Strategy and Finance.
The government admitted that it had to lower its estimate - which recently stood as high as 4 percent - as the euro zone debt crisis keeps on dragging out.
“However, the economy is expected to steadily improve in the second half and full-year growth will resolve itself at 3 percent,” Choi added.
The ministry expects the economy will have grown 2.1 percent by the end of this year, lowering its earlier forecast of a 3.3 percent expansion. Fourth-quarter figures are not yet available.
Along with the slower growth, about 320,000 new jobs are expected to be created next year, 120,000 fewer than this year, the ministry said.
The current account surplus is also expected to decline to $30 billion from $42 billion this year.
According to the ministry’s calculations, exports, which account for more than 50 percent of the economy, will grow 4.3 percent on-year in 2013, while imports are projected to climb 4.6 percent.
The ministry acknowledged that the first three months of 2013 will likely be a difficult period for middle-to-low income earners.
“As the low-growth trend is expected to continue for an extended period, working-class people may find it harder to make ends meet,” Choi said.
With the flagging growth momentum, especially in the private sector, young people may face even more job shortages next year and conditions for the self-employed look set to become aggravated.
Private-sector consumption is forecast to grow a mere 2.7 percent as the sluggish housing market and high household debt compels people to tighten their purse-strings.
Affected in part by rising international grain prices, consumer prices are expected to grow 2.7 percent next year, above this year’s 2.2 percent hike.
In a survey of 1,000 members of the public, 57.1 percent of respondents chose high inflation as their top concern about the economy next year, followed by job shortages (50 percent).
The government plans to concentrate its efforts on stabilizing macro-economic conditions in response to the expected economic woes next year. It also aims to bolster economic activities by easing polarization between rich and poor, and between small and large companies, in line with the much-touted political catchphrase “economic democratization.”
In the face of slow economic growth, the ministry plans to frontload government spending. About 60 percent of the planned expenditure will be executed in the first half of the year. It also has plans to ease regulations for the stagnant housing market and improve conditions for private investment.
However, the ministry didn’t propose any new policy measures, with President-elect Park Geun-hye set to be formally sworn in this February.
As other big economies are also expected to experience slowdowns, uncertainties in the global financial market will increase. Korea could experience sudden in-and-outflows of foreign currencies in 2013.
By Song Su-hyun [firstname.lastname@example.org]