Korean economy unlikely to achieve 2% growth this year

GDP expands by only 0.4% in third quarter

The economy is unlikely to reach annual growth of 2 percent this year amid the prolonged slowdown in exports and domestic consumption, experts said Tuesday.

The Bank of Korea (BOK) said it estimated the economy to have grown by only 0.4 percent in the third quarter from the previous quarter.

In addition, it is showing no signs of a meaningful rebound in the fourth quarter, so chances remain slim for the government to achieve the 2 percent figure, according to economists and market experts.

“It is unlikely that the economy will attain 2 percent growth in consideration of the statistical data unveiled through the third quarter,” Kim Sang-bong, an economics professor at Hansung University, said.

GDP growth would only be able to hit the target if the government was to rapidly come up with a super expansionary fiscal policy, Kim added.

To reach the annual growth target, the economy needs to grow by more than 0.93 percent in the fourth quarter from the previous quarter, according to the BOK.

But there is no chance of reaching this due to the intentional fiscal drive by the government, Kim said.

“As of now, annual GDP growth is expected to reach around 1.9 percent, as exports remain sluggish and there is no clear indication that weak domestic consumption will expand in the near future.”

The BOK also unveiled its third-quarter GDP deflator which is an index used to indicate price levels in the economy.

The central bank said the figure decreased 1.6 percent from a year ago, the lowest since the second quarter of 1999.

Falling prices for the nation’s major export items drove the figure down during the third quarter.

“The drop in prices of export items, such as semiconductors, displays, steel and petrochemicals, caused the negative GDP deflator,” an official from the BOK said.

But chip prices are showing signs of a recovery, so the GDP deflator will swing back to a positive figure in the near future, according to the official.

KTB Investment & Securities analyst Lim Hye-yoon, however, said the local economy will be unlikely to see a meaningful rebound in such a short period of time.

The analyst said any potential recovery still depends on whether the United States and China reach an agreement in their year-long trade war.

“The trade negotiation between Washington and Beijing will decide the future of the local economy,” the analyst said.

Semiconductor exports are rising, but so far, it is too early to expect the local economy to get back on a stable recovery track in the near future, according to Lim.