Economic growth in South Korea's moribund economy is expected to slow down to anywhere from 2.8 percent to three percent this year. It should be at the same level in 2019.
This pace is far below that of the global economy, which is expected to grow by 3.7 percent in 2018 and in 2019. The forecast for the global economy for 2018 is down from the original estimate of 3.9 percent. In 2017, the South Korean economy expanded by 3.1 percent.
The International Monetary Fund (IMF) joins the ranks of other major banking institutions predicting a less than rosy growth outlook for South Korea. It reduced its estimate for South Korea's economic growth in 2018 to 2.8 percent from 3 percent because of weak corporate investment and anemic domestic consumption. The IMF also slashed its growth projection for South Korea for 2019 to 2.6 percent from 2.9 percent.
Estimates by the South Korean government and other financial institutions concur in the slower growth. The Organization for Economic Cooperation and Development (OECD) reduced its growth estimate for South Korea to 2.7 percent this year from the previous three percent.
UBS and Nomura trimmed their outlook to 2.9 percent and 2.8 percent, respectively, from three percent. Goldman Sachs lowered its estimate to 2.7 percent from 2.9 percent.
The South Korean government earlier toned down its growth target to 2.9 percent for the year from its earlier projection of three percent. The Bank of Korea's growth forecast sees the economy slowing to 2.9 percent from its previous projection of three percent.
Despite this unanimity of opinion, economists are worried that political considerations might further trim down these already slender forecasts. Particularly worrying to Korean and Western economists is the apparently unshakeable determination of South Korean President Moon Jae-in to invest heavily in North Korean projects at this awkward moment.
Moon still intends to spend a lot of South Korean money on North Korea-related projects, ramping-up the downward pressure on South Korea's flailing economy. Some economists noted that spending tens of billions of dollars in North Korea when many South Koreans are unhappy with their own economy will be tough to sell politically.
In September, Moon's government sponsored a bill that proposes spending $419 million in 2019 for a raft of business and other ventures in North Korea. This spending will be allotted to having more family reunions; opening a joint liaison office and arranging for sporting tournaments, among others.
These activities were first mentioned in a declaration signed by Moon and North Korean leader Kim Jong-un in April. Opposition politicians are hammering Moon for deliberately concealing the long-term costs of these North Korea-related ventures for fear of public backlash. Also worrisome is the $262 million allotted by Moon for connecting and modernizing inter-Korean transport links in 2019.
