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 percent in 2018, versus an earlier forecast of 3 percent, the finance ministry said on Wednesday. The economy grew 3.1 percent in 2017.
“Exports excluding semiconductors are stagnant and investment is falling,” Doh Kyusang, a director-general 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 $3.5 billion extra budget in May.
Economic growth is projected to tick down to 2.8 percent in 2019, the ministry said.
Inflation is also forecast to cool a bit, registering 1.6 percent this year, compared with an earlier estimate of 1.7 percent, the ministry said. Price growth will pick up to 1.8 percent in 2019, it said. Inflation was 1.9 percent in 2017.
The Bank of Korea last week lowered its own 2018 growth forecast to 2.9 percent, while leaving its inflation outlook unchanged at 1.6 percent. It cited similar reasons as the finance ministry. The central bank held its benchmark interest rate at 1.5 percent.
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.
