The South Korea economy poised to perform its worst since 1997-1998 financial crisis at best may manage a growth of 0.2 percent or contact as much as 1.6 percent this year if pandemic woes stretch into the second half, a state think tank warned.

In revised outlook for this and next year economy, the Korea Development Institute (KDI) on Wednesday slashed its economic growth outlook to 0.2 percent for this year from 2.3 percent estimated in November last year.

Although such growth would be the lowest since a contraction of 5.1 percent in 1998 when the country went under international bailout from liquidity crisis in late 1997, “the odds are equally high for the economy to contract this year,” KDI said.

The economy could bounce back by 3.9 percent next year, but actual growth will fall below the country’s growth potential of 2.4 percent as it is against dismal year-ago performance, the institute said.

Exports were projected to fall 15.9 percent and domestic consumption 2 percent this year.

Inflation will be the same as last year at 0.4 percent.

Against such the worst dangers in more than 2 decades, the institute advised the Bank of Korea to push the benchmark interest rate currently at 0.75 percent to near zero percent and employ unconventional easing means such as direct purchases of securities.

In the longer term, the government may have to consider tax hike to rein in the increase in fiscal deficit and debt, it added.

By Yang Yeon-ho and Lee Eun-joo

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