South Korea's economy forecast to expand 2.8 pct this year

15:35 | 02/10/2018 Global Economy

According to the report by Hyundai Research Institute (HRI), Asia's fourth-largest economy is forecast to expand 2.8 percent this year, and experience more sluggish growth in 2019, as the economy as a whole copes with a "period of recession."

Consumers go shopping at a supermarket in Seoul, South Korea

This year's estimate is lower than 2.9 percent forecasts made by the government and the Bank of Korea, while next year's figure is also more conservative than that made by the government, the central bank, and the Organization for Economic Cooperation and Development (OECD). Seoul and the OECD predicted the country could pull off 2.8 percent growth next year.

"Chances are that the global economy will be stagnant next year, which would cause local exports to decline and dull investment and consumption," the institute said in the report.

Private consumption is forecast to expand 2.7 percent this year and 2.5 percent for 2019, the HRI said, citing a slower-than-expected improvement in labor market conditions and a possible hike in interest rates.

It also lowered its growth estimates in construction and facility investments, with facility investment growth to dip to 0.4 percent next year from this year's 1.4 percent due mainly to lower demands for semiconductors.

On the export front, South Korea could post 4.8 percent on-year gains next year, down from 7.2 percent growth forecast for 2018, according to the institute.

"The possible recession in the semiconductor market and trade disputes between the U.S. and China, among others, would put downward pressure on the South Korean economy," the institute said, calling for efforts for structural reform and resolving structural problems to cope with downside risks.

Theo Yonhap