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Projected rates of increase for exports in key industries in 2019
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Projection reflects stagnant global growth and dipping investment and consumption
The state-run Korea Institute for Industrial Economics & Trade (KIET) projected a 2019 growth rate of 2.6% for the South Korean economy, down 0.1 percentage point from this year. The projection was based on predictions that the growth rates of advanced and developing economies alike would remain stagnant, with exports and investment both dipping slightly and consumption dropping off from this year. With South Korea entering a low-growth era, KIET called for “strong policies to promote domestic demand for the sake of stable growth.” In a “2019 Economy and Industry Forecast” released on Nov. 26, KIET projected a 2.6% real GDP growth rate for next year. In June, the institute lowered its predicted growth rate for 2018 from 3.0% to 2.7%. A 3.7% rate of increase was predicted for 2019 in exports, which have a particularly large impact on the domestic economy. The projected rate is lower than both the 4.7% cumulative rate of increase through September of this year and the 6.4% predicted rate increase for exports this year. “With the global economic growth trend slowing, the increase in volumes will be only minor,” KIET predicted. “Downward pressures on export unit prices also appear likely to grow if semiconductor prices fall and international oil prices remain in a holding pattern,” it said. With imports projected at 4.5% amid weakening growth for the domestic economy, next year’s trade surplus was predicted to amount to around US$74 billion, slightly less than this year’s. Increased exports were predicted for eight of South Korea’s 13 mainstay industries, including shipbuilding (13.8%), oil refining (6.1%), semiconductors (9.3%), and rechargeable batteries (8.6%). Declining exports were predicted for the other five, including automobiles (-0.2%), steel (-3.3%), household appliances (-7.5%), and displays (-2.5%). Exports were seen as likely to fall for industries such as automobiles and textiles with a large employment effect and rise for industries like petrochemicals with a relatively smaller effect, leading to the persistence into next year of a situation where increased exports do not lead to increased jobs. KIET predicted the 2019 rate of increase in consumption at just 2.6%, reflecting worsening conditions in economic sentiments and income. Facility investment was expected to rebound with a slight 1.9% rise, while the decline in construction investment was expected to grow (-3.1%) amid government measures to stabilize the real estate market and a reduced budget for social overhead capital (SOC). “A recovery in private spending is key to stable growth for the economy,” KIET concluded, calling for “strong measures to promote domestic demand alongside the systematic implementation of income-driven growth, job creation, fair competition, and innovation growth.” “Domestic demand promotion measures are also needed to drive growth and to overcome the structural issue of a weakening positive feedback loop between increased exports and domestic production,” the institute said. By Choi Ha-yan, staff reporter Please direct comments or questions to [english@hani.co.kr]
