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Title 2016 & Mid-term Economic Outlook

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    2015-09-21
2016 & Mid-term Economic Outlook
 
   The Korean economy is projected to grow 3.0% in 2016, 0.4%p higher than in 2015. Domestic consumption is expected to moderately increase centered on facilities investment, and gross exports will rise driven by the base effect of the rapid fall in 2015 and the recovery of the global economy. However, the recovery and growth momentum of the country is forecast to be weak due to structural issues that limit the domestic demand boost and uncertainties surrounding the global economy. On the domestic level, household debt continues to ratchet upwards and the confidence level of leading economic agents for growth is slipping. On the global level, downward pressure on growth persists because of the spread of uncertainties, including the interest rate increase of the US, concerns over the sluggish Chinese economy, and the possibility of economic crisis in emerging economies.

   The real GDP growth rate during 2017~2019 is forecast to grow at an average of 3.3% per year, thus exceeding the annual average of 2.8% for the 2015~2016 period. The higher growth will be underpinned by a gradual pickup in domestic consumption, which has remained weak for the recent several years, and the rise in overseas exports thanks to the improvement of the global economy led by developed countries that have a high purchasing power.

   The potential annual average growth rate of Korea during the 2015~2019 period is estimated at somewhat higher than 3%, and the downward trend is projected to linger for the foreseeable future due to the limitations faced during the catch-up growth phase and the nation’s demographic changes such as the low birthrate and aging population. In particular, as the major culprit for the lowered potential growth rates over the past five years between 2010 and 2014 was analyzed as sagging long-term investment, more invigorating policy efforts will be needed to tackle the issue.

[ 2016~2019 Korean Economic Outlook ]
(Unit: %, USD 100 million, KRW, Year-on-Year change)
2014 2015 2016 2017 2018 2019
Real GDP (%) 3.3 2.6 3 3.2 3.3 3.3
      Private consumption (%) 1.8 1.9 2.3 2.6 2.7 2.8
      Facilities investment (%) 5.8 4.9 5.2 4.6 4.4 4.3
      Construction investment (%) 1 3 1.4 2 1 0.8
      Gross exports (%) 2.8 1.2 2.9 3.3 3.5 3.6
      Gross imports (%) 2.1 2.2 2.8 2.9 3.1 3.1
Current Balance (USD 100 million) 892 1,114 978 886 837 792
      Export of goods (customs clearance) 2.3 -5.9 5.8 4.8 4.3 4.1
      Import of goods (customs clearance) 1.9 -14.3 10.9 6.7 5.1 4.7
GDP Deflator (%)  0.6 1.7 1 1.3 1.5 1.5
CPI Inflation (%) 1.3 0.7 1.4 1.6 1.8 1.8
Unemployment (%) 3.5 3.6 3.5 3.4 3.4 3.4
Won/dollar Rate (won) 1,053 1,137 1,161 1,108 1,079 1,076
3-year Treasury Yields (%) 2.6 1.9 2.2 2.5 2.7 2.7
Nominal GDP (%) 3.9 4.3 4 4.5 4.8 4.8
Notes:
1. The unemployment rate is based on those without work, available for work, and actively seeking work during the previous four weeks. The exchange rate and the treasury yields refer to annual averages.
2. The figures in 2014 are actual numbers, and those from 2015 are the forecasts of the National Assembly Budget Office. Source: National Assembly Budget Office, Bank of Korea, Statistics Korea
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