2% growth in 2020 could be difficult

A private think tank estimated that Korea could find it tough to achieve 2 percent economic growth next year, taking a cue from falling exports and weak domestic consumption.

“Doubts have arisen about Korea reaching 2 percent growth next year, due to a deepening economic slowdown at home and abroad,” Hyundai Research Institute said in a report released Sunday.

“If exports and domestic consumption continue to be weak, Korea’s economic growth may not meet 2 percent next year,” the report noted.

The country’s recent economic indicators show signs of weakening.

Exports, for instance, dropped 11.7 percent in September, affected by difficult trade conditions including the ongoing U.S.-China conflict, as well as declining semiconductor prices.

The country also fears the grip of deflation as inflation went into the red last month for the first time ever. Consumer prices last month fell 0.4 percent on year - far lower than the official inflation target of 2 percent, although the central bank and the government denied that Korea is suffering from deflation.

Fears are rising that deflation could start a vicious cycle of weak consumer spending, tepid investment and low growth.

Hong Joon-pyo, a researcher at the think tank, underlined negative indicators for manufacturing sector worldwide as a factor pulling down investment and exports.

The Purchasing Managers’ Index (PMI), a gauge of U.S. manufacturing provided by the Institute for Supply Management, dropped to 47.8 in September, its worst level in more than 10 years.

Other global economic institutions have revised downward their outlooks for Korea as well.

The Organization for Economic Cooperation and Development said in an interim outlook report earlier this year that the Korean economy would grow 2.3 percent in 2020, slower than its previous forecast of 2.5 percent.

Fitch Ratings, a global credit rating agency, also reduced the country’s 2020 GDP growth forecast by 0.3 percentage points to 2.3 percent, citing growing trade risks.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]