SEOUL, Dec. 3 (Korea Bizwire) — Expectations that South Korea will achieve 3 percent growth and per capita income of US$30,000 are on the rise for 2018 fueled by the strengthening of the global economy, market watchers said Sunday.
Observers said that the upbeat forecast is based on gains in exports in the new year and a rise in domestic consumption that is critical for growth.
The International Monetary Fund (IMF), the Organization for Economic Cooperation and Development (OECD), the Korea Institute for Industrial Economics and Trade (KIET) and Korea Capital Market Institute all estimated that Asia’s fourth-largest economy will grow 3 percent in the new year following similar growth in 2017.
Of note is that the IMF, OECD and KIET, as well as the Bank of Korea (BOK), have all recently marked up their growth estimates for 2018 compared with earlier in the year.
BOK Gov. Lee Ju-yeol said last week after the Monetary Policy Committee met that South Korea’s growth rate will be on par with its growth potential in 2018, thanks mainly to global economic recovery trends.
The country’s gross domestic product advanced 1.5 percent in the third quarter so unless growth falls into negative territory in the October-December period, 3 percent growth is assured.
In regards to gross national income (GNI) that has stayed fixed in the $20,000 range since 2006 and stood at $27,561 last year, experts said that the strengthening of the Korean won to the U.S. dollar could help push up numbers next year, especially if worldwide growth stays on course.
Both the IMF and OECD are predicting global growth of 3.7 percent in the new year, up 0.1 percentage point from 2017.
This can lead to more trade that is beneficial for a export driven economy like South Korea.
In addition many economists are betting that private spending will rise in 2018, which can bolster growth that can lead to sustainable growth.
Despite such upbeat expectations, there are some that point out that overall growth may be affected by weaker facility and construction sector investments, with such developments impacting the GDP in particular.
Ju Won, a senior researcher at the Hyundai Research Institute, said that GNI of $30,000 is likely at the present pace although growth may not necessarily reach 3 percent.
He said that exports will remain the growth engine, but domestic consumption may not meet expectations that can hurt the overall economy.
The HRI researcher, in particular, raised concerns about the fallouts from rising crude prices, interest rates and the Korean won.
Other factors, such as a mounting household debt that surpassed the 1,400 trillion-won (US$1.29 trillion) mark in September, are things that can pour cold water on growth.
“Depending on future developments, there is a chance that the recent economic recovery may be short-lived,” he claimed, adding that worrisome unemployment data could weigh down the economy. In October, youth unemployment stood at 8.6 percent, with the “real term” jobless rate standing at 21.7 percent.