The Organization for Economic Cooperation and Development (OECD) on Monday cut its 2016 growth forecast of the South Korean economy to 2.7 percent from 3.1 percent, citing sluggish global trade and a slowdown in China, Yonhap news agency reported.
For next year, it anticipated that Asia's fourth-largest economy will attain 3 percent growth as the world economy picks up steadily, according to the latest report titled, "OECD Economic Survey of Korea". In its earlier forecast, the OECD had expected that South Korea's economy would grow 3.1 percent in 2016 and 3.6 percent in 2017. "The strong rebound in the second half of 2015, supported by fiscal stimulus, faltered in early 2016 as private consumption declined," the report said. "Weak demand from China, which accounts for a quarter of Korean exports, continues to constrain export growth".
The International Monetary Fund (IMF) lowered its 2016 growth estimate for South Korea to 2.7 percent, and the Bank of Korea also revised down its 3 percent growth target to 2.8 percent. Such downward revisions by the global organizations are based on recent sluggish economic data at home and abroad.
South Korea's gross domestic product (GDP) grew 1.2 percent on-quarter in the third quarter and 0.7 percent in the fourth quarter of last year on the back of the government's expanded fiscal spending and brisk private consumption, while outbound shipments fell for every single month of the year. But the economy seemed to cool down in the first quarter as the GDP gained a meager 0.4 percent on-quarter, dragged down by fast-falling exports and tepid consumption.
Exports have posted a double-digit drop since the beginning of the year, marking a record 19 percent plunge in January and a 13.1 percent fall in February. The downward pace slowed slightly to 8.1 percent in March but accelerated again to 11.2 percent in April.
The government churned out a series of stimulus measures to boost growth, including frontloading 40 percent of government spending in the first quarter and extending excise tax cut programs. But the OECD pointed out that they are not enough to get out of the downside cycle to reach the growth target, citing the first quarter's sluggish numbers, calling for more fiscal intervention in the economy.