Think tank identifies potential risks to recovery

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Think tank identifies potential risks to recovery

The Korea Development Institute, a state-run economic think tank, expressed concern yesterday about falling business profits and rising household debt.

In a report on its growth outlook for the second half of 2013, the institute said most Korean businesses have seen declines in profitability in recent years, increasing the risks of companies being unable to repay loans, which serves as a major drag on growth.

It also pointed out to household debt as another threat since the debt level remains higher than disposable income.

The KDI report forecast 3.7 percent growth next year, lower than the Ministry of Strategy and Finance’s 3.9 percent and Bank of Korea’s 3.8 percent projections. The International Monetary Fund has forecast 3.7 percent growth.

The Organization for Economic Cooperation and Development yesterday predicted the Korean economy will grow 3.8 percent next year and more in 2014.

However, the National Assembly Budget Office and some private institutes offered lower figures.

The think tank projected a low inflation policy is likely to be maintained for the time being, and private consumption would gradually recover along with persistent growth in exports.

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