South Korea trims growth forecasts on trade tensions

SEOUL • South Korea has trimmed its economic growth forecasts for this year, citing rising global trade tensions and a slump in facilities investment.

Asia’s fourth-largest economy is expected to grow 2.9% in 2018, versus an earlier forecast of 3%, the Finance Ministry said yesterday. The economy grew 3.1% in 2017.

“Exports excluding semiconductors are stagnant and investment is falling,” Doh Kyusang, a DG for economic policy at the ministry, said in a briefing on Tuesday.

South Korea’s export-dependent economy already faces slowing employment growth, a risk to President Moon Jae-in’s quest to become a “jobs president”. That was behind the decision on Saturday to slow the pace of planned minimum wage increases, as well as passage of a US$3.5 billion (RM14.19 billion) extra budget in May.

Economic growth is projected to tick down to 2.8% in 2019, the ministry said. Inflation is also forecast to cool a bit, registering 1.6% this year, compared to an earlier estimate of 1.7%, the ministry said.

Price growth will pick up to 1.8% in 2019, it said. Inflation was 1.9% in 2017. The Bank of Korea last week lowered its 2018 growth forecast to 2.9%, while leaving its inflation outlook unchanged at 1.6%. It cited similar reasons as the Finance Ministry. The central bank held its benchmark interest rate at 1.5%.

The government has said it plans to keep its fiscal policy supportive of investment, increasing spending next year more than previously planned. It has said it will also expand earned-income tax credits and provide more support for the society’s vulnerable. — Bloomberg