IMF trims GDP growth outlook for Korea to 3.3%

The International Monetary Fund has downgraded its economic growth forecast for Korea by 0.4 percentage point to 3.3 percent for 2015, citing weak momentum due to lagging business and consumer sentiment.

According to the IMF’s World Economic Outlook for 2015 announced on Tuesday, local time, in Washington, Korean GDP is expected to grow 3.3 percent this year and 3.5 percent in 2016, 0.4 percentage point less than the organization had forecast in January.

The global economic outlook for 2015 remained the same at 3.5 percent. For next year, the IMF raised its forecast by 0.1 percentage point to 3.8 percent.

The organization believes some developed countries will see steady growth of 2.4 percent.

However, the IMF slashed its projection for the United States to 3.1 percent. It said the eurozone and Japan are likely to experience steady recoveries.

The organization left unchanged its January forecast for 4.3 percent growth in emerging economies. The report cited some slowing in oil-producing countries, China and Latin America.

Addressing such global economic risks as another sudden plunge in oil prices, geographical disputes and low inflation in developed countries, the IMF offered some suggestions for policy makers. They included maintaining expansionary monetary policies in developed countries and strengthening macroeconomic policy making in emerging countries in preparation for unexpected shocks in their financial sectors.

The IMF’s downward revision comes after the Bank of Korea cut its economic forecast for GDP growth this year to 3.1 percent on April 9 from 3.4 percent in January.

The projections by the fund and the central bank were lower than the Korean Finance Ministry’s forecast in December of 3.8 percent growth.

Despite inflation below 1 percent for four consecutive months, Finance Minister Choi Kyung-hwan has remained consistently upbeat regarding growth prospects for the Korean economy.

On April 1 at a meeting with economic advisers from the private sector, Choi said he “had no plan” to lower the ministry’s economic outlook for 3.8 percent growth.

During a cabinet meeting on Monday with economy-related ministers after the BOK cut its forecast, Choi maintained his rosy forecast, saying “some figures were showing positive flows,” particularly in the real estate market.

A recent survey by the Federation of Korean Industries (FKI) showed 82.4 percent of 34 economists from state-run and private research institutes and academia expect Korea’s economic growth to be below 3.4 percent this year.

About 14 percent said they anticipate the growth rate will be between 2.5 percent and 2.9 percent.

The FKI also said in February that 82 percent of the executives at the country’s top 30 conglomerates said Korea was likely to experience economic depression for at least the next few years.

BY KIM HEE-JIN [kim.heejin@joongang.co.kr]