Korea's growth outlook unchanged at 3.7%: IMF

By Yoon Ja-young

The Korean economy is expected to grow 3.7 percent this year, the International Monetary Fund (IMF) said in its World Economic Outlook released Tuesday.

The figure is unchanged from its projection in July.

The fund said Korea is maintaining recovery thanks to exports and increasing investment. It did not elaborate further.

The Ministry of Strategy and Finance also expects the economy to expand 3.7 percent this year, and 4 percent next year. The Bank of Korea has estimated 3.8 percent growth for the year, but the central bank governor Lee Ju-yeol hinted that it is likely to lower its forecast to the mid-3 percent range.

Meanwhile, the IMF revised the growth forecast for the world economy downward to 3.3 percent for this year, 0.1 percentage points lower than the July outlook.

“Downside risks have increased since the spring,” the IMF said.

“Short-term risks include a worsening of geopolitical tensions and a reversal of recent risk spread and volatility compression in financial markets,” it noted.

The report cited stagnation and low and declining potential growths as medium-term risks.

Thus, raising the actual and potential growth should be a priority, it advised.

The IMF noted uneven global recovery. “Overall, the pace of recovery is becoming more country specific.”

The U.S. economy is expected to grow 2.2 percent this year, while the IMF lowered down the growth projection for the EU by 0.3 percentage points to 0.8 percent. It also slashed the estimation for Japan by 0.7 percentage points to 0.9 percent. “In Japan, the decline in domestic demand following the increase in the consumption tax was larger than expected,” the report notes. China, meanwhile, is expected to grow 7.4 percent.

The markets may be “underpricing risk, not fully internalizing the uncertainties surrounding the macroeconomic outlook and their implications for the pace of withdrawal of monetary stimulus in some major advanced economies,” the report adds.