IMF downgrades 2023 economic outlook
The International Monetary Fund (IMF) said Tuesday the global economy will slow further to register 2.7 percent growth next year, 0.2 point lower than a previous forecast made in July. This is 0.5 point lower than a 3.2-percent estimate for this year. The IMF also expected Korea's growth to slide to 2 percent next year from 2.6 percent this year.
"The worst is yet to come, and for many people 2023 will feel like a recession," the IMF said in a report. It expected the world's three major economies ― the United States, China and the European Union ― will continue to stall. Former Federal Reserve Chair Ben Bernanke, who was awarded the Nobel Prize in economic sciences Monday, warned against "capital outflows" from emerging markets due to a very strong U.S. dollar.
The IMF cited the possible drastic drop in housing prices in China as a notable downside risk, given that the real estate market accounts for 30 percent of the Chinese economy. It also mentioned other risk factors such as the prolonging of the Russian invasion of Ukraine coupled with the U.S. Federal Reserve's move to raise its benchmark interest rates, weakening currencies of other countries.
Affected by Russia's move to curb exports of natural gas, European economies will suffer intensifying economic hitches. This means most of Korea's major trading partners will undergo an economic slump next year, deteriorating the external environment for the Korean economy. Downside factors have already begun to impact the Korean economy.
Global energy prices have continued to rise amid the protracted war in Ukraine. The great power rivalry between the U.S. and China has become fiercer, with global trade contracting due to the realignment of global supply chains. The export-oriented Korean economy is highly vulnerable to such factors with its heavy reliance on foreign trade.
Downside risks have already been conspicuous. Korea suffered a trade deficit for the sixth consecutive month in September. The nation is expected to post an annual trade shortfall for the first time since the 2008 global financial crisis.
Both businesses and households are already feeling the pain of soaring commodity prices and high interest rates plus the plunging values of the Korean won against the U.S. dollar. The IMF raised the inflation outlook for Korea to 5.5 percent next year. The Yoon Suk-yeol administration is still struggling to head off a looming crisis.
Stoking further concerns, the ruling and opposition parties have been engrossed in partisan strife, putting major economic issues on the back burner. The rapid depreciation of the Korean won and tumbling stock prices have caused foreign investors to question the Korean government's crisis management abilities. It is time for the parties to stop wasteful political wrangling and share the sense of crisis. They should join efforts to prevent looming economic woes.
The International Monetary Fund (IMF) said Tuesday the global economy will slow further to register 2.7 percent growth next year, 0.2 point lower than a previous forecast made in July. This is 0.5 point lower than a 3.2-percent estimate for this year. The IMF also expected Korea's growth to slide to 2 percent next year from 2.6 percent this year.
"The worst is yet to come, and for many people 2023 will feel like a recession," the IMF said in a report. It expected the world's three major economies ― the United States, China and the European Union ― will continue to stall. Former Federal Reserve Chair Ben Bernanke, who was awarded the Nobel Prize in economic sciences Monday, warned against "capital outflows" from emerging markets due to a very strong U.S. dollar.
The IMF cited the possible drastic drop in housing prices in China as a notable downside risk, given that the real estate market accounts for 30 percent of the Chinese economy. It also mentioned other risk factors such as the prolonging of the Russian invasion of Ukraine coupled with the U.S. Federal Reserve's move to raise its benchmark interest rates, weakening currencies of other countries.
Affected by Russia's move to curb exports of natural gas, European economies will suffer intensifying economic hitches. This means most of Korea's major trading partners will undergo an economic slump next year, deteriorating the external environment for the Korean economy. Downside factors have already begun to impact the Korean economy.
Global energy prices have continued to rise amid the protracted war in Ukraine. The great power rivalry between the U.S. and China has become fiercer, with global trade contracting due to the realignment of global supply chains. The export-oriented Korean economy is highly vulnerable to such factors with its heavy reliance on foreign trade.
Downside risks have already been conspicuous. Korea suffered a trade deficit for the sixth consecutive month in September. The nation is expected to post an annual trade shortfall for the first time since the 2008 global financial crisis.
Both businesses and households are already feeling the pain of soaring commodity prices and high interest rates plus the plunging values of the Korean won against the U.S. dollar. The IMF raised the inflation outlook for Korea to 5.5 percent next year. The Yoon Suk-yeol administration is still struggling to head off a looming crisis.
Stoking further concerns, the ruling and opposition parties have been engrossed in partisan strife, putting major economic issues on the back burner. The rapid depreciation of the Korean won and tumbling stock prices have caused foreign investors to question the Korean government's crisis management abilities. It is time for the parties to stop wasteful political wrangling and share the sense of crisis. They should join efforts to prevent looming economic woes.
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