SEOUL, Oct. 26 (Korea Bizwire) - Global economic think tanks and investment banks (IBs) are predicting South Korea’s growth to slide to the upper 2 percent range in 2016 due to slumping exports and weak domestic demand, financial market sources said Monday.
The latest monthly Consensus Economic report showed overseas think tanks and IBs expect Asia’s fourth-largest economy to grow at an average rate of 2.9 percent next year, down from a 3.2 percent estimate forecast in September.
The average growth projection is lower than the 3.3 percent growth being predicted by South Korea’s finance ministry and 3.2 percent gross domestic product (GDP) gain forecast by the Bank of Korea (BOK).
Lee Seung-hoon, an analyst at Samsung Securities Co., said the country’s growth forecast took a hit as think tanks and IBs are forecasting tough times ahead.
“There have been uniform downgrades compared to September for most key economies, although the drop in South Korea’s is relatively steeper than others,” he said.
Consensus Economics, which is based on surveys carried out on some 700 analysts working for IBs and research institutes around the world, also predicted China’s GDP growth will dip to 6.5 percent in 2016 from 6.6 percent predicted last month, with numbers for Western European countries backtracking to 1.8 percent from 1.9 percent. Data said Japan’s economy may grow by 1.3 percent in the new year, up from an earlier forecast of 1.5 percent.
Lee said the reason why South Korea’s GDP growth was marked down more vis-a-vis rivals is because of worries that South Korea’s exports and domestic consumption will struggle to regain momentum.
Reflecting such views, local observers said that such concerns are reflected in growth estimates released by individual IBs that were compiled by Bloomberg.
According to this data, South Korea’s weighted average growth dipped to 2.9 percent in this month’s report from 3 percent in September.
Others, such as Morgan Stanley, BNP Paribas, Nomura and ING, all predicted next year’s growth for South Korea falling below 3 percent.
The latest Consensus Economics, meanwhile, showed that for 2015, South Korea may be able to pull off growth of 2.5 percent, unchanged from the month before.
“Most IBs are of the opinion that growth predictions made by the BOK are overly optimistic,” said Kim Jeong-bin, a researcher at the Korea Center for International Finance. Earlier this month the central bank said South Korea could grow 2.7 percent this year.