Growth rate forecast to stay in 2% range in 2016

By Choi Sung-jin

An increasing number of economists believe it will be difficult for Korea to record more than 3 percent economic growth next year.

According to the Ministry of Strategy and Finance and other sources, the average growth rate for next year, as projected by 19 institutions such as government and private think tanks and financial companies, is 2.9 percent.

The ministry issued the most optimistic forecast of 3.3 percent while U.S. investment bank Morgan Stanley was the most pessimistic with 2.2 percent.

Private economists’ forecasts were relatively gloomier. The Bank of Korea, IMF and OECD forecast the Korean economy would grow by 3.1 to 3.2 percent, but private think tanks such as Hyundai and LG research institutes believe the growth rate will remain in the mid-2 percent range.

Foreign investment banks predict the low-2 percent range.

With this year’s growth estimated to stop at 2.7 percent, way below the government’s 3.1 percent target, the forecast for 2016 is also likely to fall further toward year-end. The Korea Development Institute, a state think tank, is highly likely to revise downward its 2016 growth outlook. “The International Monetary Fund has lowered next year’s growth forecast reflecting global environment, which means there is room (for us, too) to pull down forecast,” a KDI researcher said.

The ministry also seems to be considering whether to lower the government’s growth forecast for next year. However, given the government’s forecast is close to its target, it would be difficult for the ministry to revise it further downward, officials said.