IMF cuts 2022 growth outlook for South Korea to 2.3 percent
A photo of the International Monetary Fund (IMF) logo / Reuters-Yonhap
The International Monetary Fund (IMF) on Tuesday lowered its 2022 economic growth outlook for South Korea to 2.3 percent, as Asia's fourth-largest economy faces heightened external economic uncertainty amid high inflation.
The revision marked a decrease from the growth forecast of 2.5 percent that the Washington-based organization made in April. The IMF also cut next year's growth estimate for South Korea to 2.1 from 2.9 percent.
The IMF's 2022 growth outlook is lower than the South Korean government's forecast of 2.6 percent and the 2.7 percent projection by the Bank of Korea (BOK).
Still, the IMF's 0.2 percentage-point cut for Korea's 2022 growth outlook was smaller than the average of 0.8 percentage-point decline for advanced nations, according to Seoul's finance ministry.
The South Korean economy faces a risk of stagflation, a mix of slowing growth and high inflation, due to heightened economic uncertainty from the protracted war between Russia and Ukraine, and the Federal Reserve's aggressive rate hikes.
The Korean economy grew at a faster pace in the second quarter than three months earlier as private spending rebounded due to the lifting of virus curbs.
The country's gross domestic product grew 0.7 percent on-quarter in the April-June period, accelerating from a 0.6 percent increase in the first quarter, according to an advance estimate by the BOK.
But Asia's fourth-largest economy is feared to lose steam, as exports growth and investment could be dented by the global economic slowdown. The latest spike in COVID-19 cases also could weigh on the fledgling recovery of consumer spending.
Overseas shipments, which account for half of the Korean economy, shrank 3.1 percent on-quarter in the second quarter, compared with a 3.6 percent gain three months ago.
Inflationary pressure has mounted due mainly to soaring oil and commodity prices caused by the Ukraine crisis. The South Korean currency's sharp weakness against the dollar also exerted upward pressure on inflation as it boosted import costs.
South Korea's consumer prices soared 6 percent in June from a year earlier, the fastest rise in nearly 24 years and acceleration from a 5.4 percent on-year spike in May.
The Korean government expected inflation to surge 4.7 percent this year, the steepest increase in 14 years. The BOK's 2022 inflation outlook stood at 4.5 percent.
Meanwhile, the IMF lowered its 2022 growth outlook for the global economy to 3.2 percent from its April estimate of 3.6 percent, citing highflying inflation in the U.S. and Europe, and China's economic slowdown.
It also cut next year's growth projection for the world economy to 2.9 percent from 3.6 percent. (Yonhap)