Korea’s growth rate for 2017 expected to be 2.2%, lowered by 0.1%p from 2.3% this year

We have maintained our projection of growth rate as 2.3%. For the 2nd half, it is projected to fall sharply to 1.7% from 3.0% for the 1st half. Both external and internal circumstances have not been favorable for achieving further growth. Internationally, the forecast of world growth rate has been continuously leveled down. Domestically, resilience of Korean economy is losing its grip owing to the minority government, restructuring of gangling industries, and the implementation of anti-corruption law. Thus, the next year’s growth rate is forecasted to be 2.3%, grown only by 0.1%p from this year’s 2.2%. To make matters worse, the external and internal headwinds will not abate for Korea to have an amicable sail through. It’s a two-fold concern; in the global arena, the possibility of achieving a further growth becomes more infeasible for the facts that Brexit negotiation starts to initiate, the economic slowdown of China is lingering while developing nations are more vulnerable to the US Fed’s interest rate decision; at domestic level, effective measures to boost the economy have become obsolete in terms of fiscal, monetary as well as foreign exchange policies. Thus, it’s indispensable to adjust the expected growth rate.

Again in 2017, low price, low interest rate & abundant trade surplus will prevail

The overall consumer price is projected to soar only by 1.1% compared to this year’s 0.8%. Amid the crude oil price increment, the appreciation of KRW, together with the demand contraction as a consequence of implementing anti-corruption law, lower the probability of consumer price to rise. The trade surplus is forecasted to slide down to US$98 billion in 2017, compared to US$102.4 billion this year. The huge current account surplus is likely to be on a gradual decline as the degree of import loss grows. USD/KRW will revert to gradual rise from the 4th quarter of 2016 owing to the possibility of US Fed’s base rate hike, in that it is projected to record 1,138 won for the next year’s average. The market interest rate (Corp AA-, 3yr) is expected to rise by small margin as 2.0% in 2017 from 1.8% in 2016 for the fact that  US tapering shall have a limited effect in Korean rates market and growth rate of the Korean economic growth is weakening.

Global trade volume, sustains its long-term decline tendency…in an urgent necessity to improve the economic fundamentals

Recently, the long term trend of the global trade volume has been dwindled less than that of successive exacerbated periods aftermath of the 2008 global financial crisis, and the long term trend of global industrial production has not recovered fully from the level of 2008 crisis. For the past 20 years, the total debt of major countries skyrocketed and the negative growth on the prime working age population had prolonged. Thus, the most effective means to undergird the economic fundamentals to cope with secular stagnation is more than necessary.