Seoul is considering slashing its growth forecast for the year by 0.5 percentage point as Asia’s fourth-largest economy is recovering at a weaker-than-expected pace and trade remains sluggish, officials said Sunday.
“It is yet too early to pinpoint a number. We will be factoring in preliminary data for June as well as consider market indicators such as sales,” said a Finance Ministry official.
The government is set to announce its revised economic outlook later next month when it is also expected to downgrade its forecast of other macroeconomic indicators, such as employment and consumer inflation.
Seoul’s current growth forecast, announced late last year, stands at 3.8 percent. If it lowers the figure by 0.5 percentage point, the revised outlook of 3.3 percent will be slightly higher than forecasts by other economic institutions.
Earlier this month, the state-run Korea Development Institute slashed its outlook to 3 percent from 3.5 percent, while the Bank of Korea cut its forecast to 3.1 percent from 3.4 percent last month.
The International Monetary Fund has also lowered its forecast for the Korean economy to 3.3 percent from 3.7 percent, while many private sector think tanks are predicting the economy to expand at the 2 percent level.
The series of downgrades come as the country’s heavily trade-reliant economy is recovering at a slower-than-expected pace due mostly to faltering global demand and a weak Japanese yen.
Industrial output in all industries dipped 0.3 percent on-month in April as sluggish exports offset a recovery in consumption, according to Statistics Korea.
Recently released central bank data showed that souring trade conditions have hit manufacturers, with the index gauging their sentiment tumbling to 75 from 80, the first fall in four months.
The consumer price index has also been crawling. It increased less than 1 percent for the fifth month in a row in April, well below the government’s 2 percent target for this year.
Some market watchers raised views that the government may slash its consumer price inflation forecast to the low 1 percent level.
The central bank has already slashed its inflation outlook to 0.9 percent from 1.9 percent. (Yonhap)
