KDI jacks up its growth projection for this year

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KDI jacks up its growth projection for this year

Street performances return at Hongdae, Seoul, on Nov.7 as life is returning back to pre-covid. Such easing of social distancing is expected to boost domestic economy for 2022. [YONHAP]

Street performances return at Hongdae, Seoul, on Nov.7 as life is returning back to pre-covid. Such easing of social distancing is expected to boost domestic economy for 2022. [YONHAP]

 
The Korea Development Institute (KDI) raised its economic growth outlook for this year from 3.8 percent to 4 percent, citing robust exports.  
 
The state-own think tank’s outlook matches the Bank of Korea’s 4-percent projection.  
 
For next year, the KDI foresees 3 percent growth backed by a strong recovery of the domestic economy from the Covid-19 pandemic.  
 
That projection also matches the BOK’s.  
 
The KDI noted that disruptions in the global supply chain may affect Korea's manufacturers and limit next year’s growth. But a stronger domestic economy will counterbalance. 
 
The KDI said recovery from the pandemic will contribute to a sharp rebound in consumer spending especially in the services sector. Restaurants and café were badly affected by social distancing regulations.  
 
Amid increasing concern about inflation, the state-own think tank raised its projection on increases in consumer prices this year from 1.7 percent to 2.3 percent.  
 
But next year, that rate should slide to 1.7 percent.  
 
The KDI said it was against a recent demand by the ruling Democratic Party led by its presidential candidate Lee Jae-myung for another of Covid-19 grants for all Koreans.  
 
It said the government should focus on selective support for people most affected by the global pandemic and transforming Korea's economic structure rather than stimulating the economy.
 
“The economic recovery is currently in progress and ... it would be more appropriate to provide selective support for the vulnerable class,” said Jung Kyu-chul, KDI’s economic growth forecast director.  
 
“While emergency grants [for all] may add to propping up the economy a little, the impact is not that much,” Jung said.
 
The KDI also raised concerns over the national debt.  
 
“A rapid increase in national debt is inevitable considering the speed at which [Korea] is aging ... and the expected structural changes in industries for low-carbon emissions,” Jung said.
 
A recent International Monetary Fund’s report noted that Korea’s national debt-to-GDP ratio will be growing at the fastest rate among 35 countries in the next five years.  
 
It projected Korea’s government’s debt-to-GDP ratio to reach 66.7 percent by 2026 compared to the 51.3 percent expected by the end of this year.  
 

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