Korean economy projected to grow 2.6% in 2016 owed by private consumption and investment rise

Korean economy is expected to grow 2.6%(YoY) in 2016, which is not changed since our last forecast in last December; contracting export volume led by the downward shift of world growth forecast is to set off by the private consumption boost helped by the Korean government’s various demand - vitalizing policy. Private consumption is projected to grow 2.2%(YoY) this year which is a 0.1% p rise than that of last year, and construction and facilities investment are forecast to grow 3.1%(YoY), 3.7%(YoY) respectively. Export and import would sustain their current contracting trend marking -3.4%(YoY), -3.0%(YoY) respectively in 2016. In turn, the current surplus may step down a bit to 96.3 billion dollar this year, which is a 7.0% of GDP. Meanwhile, CPI is projected to level up to 1.4% in 2016 and USD/KRW is expected to climb 4.5%p up to 1,181 won.  

Korea’s 5 years growth outlook remains at 2.7%, low growth likely to prolong 

In the midst of weak resilience of export recovery led by low world growth and unrest of Chinese economy, domestic recovery is also expected to be suppressed due to interest rate rise, volatile real estate market, and ageing symptoms. CPI is estimated to rise from 1.9% in 2017 to 2.2% in 2018 ~ 2020 owed by the rebound of crude oil price and USD/KRW. Moreover, current account surplus is expected to climb down from 7.0% of GDP in 2016 to 4.5% in 2020. The changes of number of employed person is projected to slow down to 200 thousand person in 2017~2020, with unemployment rate rise up to 4.0% in 2020.

The latest rise of employed person in elderly citizens could be a statistical illusion, thus labor market repair of the age range urgently needed

Lately, the elderly employed persons whose age is over 50 years old increased remarkably. However, the rise is analyzed to be just a statistical illusion which is hard to be interpreted as a labor market improvement. In 2015, employed person between 50~64 years old increased by 286 thousand persons; however, this happened as the number of people entering this age range (645 thousand persons) outpaced that of people leaving the age range (236 thousand persons). This employment mounting effect would vanish from 2019 by demographic shift and would even negatively work as employment contraction from 2025. In turn, improving the labor market conditions of the elderly people is critical: redesign wage system, expand various working time workers and develop works suitable for the elderly.