The International Monetary Fund (IMF) kept its growth outlook for South Korea for 2019 unchanged at 2.6 percent, displaying confidence in the Korean government’s aggressive fiscal and monetary policy to prop up the economy against escalated uncertainties on the global front.
In the World Economic Outlook report released by the IMF on Tuesday (local time), the agency anticipated the Korean economy to grow at the pace of 2.6 percent this year, unchanged from its previous prediction six months ago. The agency in its October 2018 report revised its 2019 growth outlook for Korea downward to 2.6 percent from its earlier estimate of 2.9 percent, citing a slowdown in exports amid the ongoing trade conflict between the country’s two major trading partners China and the U.S.
For year 2020, the IMF forecast Korea’s economy to grow at the pace of 2.8 percent.
The agency releases economic growth outlook on global economies twice a year – April and October, and issues revisions in January and July for world’s major economies. The latter report does not include Korea.
The IMF in its report did not state any specific reasons why it maintained its growth outlook for Korea for this year, but market analysts assumed the latest action by the IMF reflects the Korean government’s super-sized budget for this year and proposal for another mega budget for next year to shore up the cooling economy. Earlier last month, the IMF recommended the Korean government come up with a more expansionary fiscal policy to prevent the country’s economic conditions from worsening and meet its 2.6 percent growth target for this year.
While maintaining Korea’s growth outlook for this year, the IMF revised down its global growth outlook for this year to 3.3 percent, down from 3.5 percent it predicted in July. It is its third downgrade in nine months.
If the global economy expands at 3.3 percent this year as the IMF predicts, it would be the slowest growth since 2016.
“The escalation of U.S.–China trade tensions, macroeconomic stress in Argentina and Turkey, disruptions to the auto sector in Germany, tighter credit policies in China, and financial tightening alongside the normalization of monetary policy in the larger advanced economies have all contributed to a significantly weakened global expansion, especially in the second half of 2018,” stated IMF Economic Counsellor Gita Gopinath in the foreword for the report, adding that the agency anticipated the condition “to persist” into the first half of this year.
The agency, however, forecast the global economy to make improvement in the latter half of this year to push up the growth rate back to 3.6 percent next year.
By Shin Heon-cheol and Cho Jeehyun
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