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S.Korea's c.bank revises 2016 growth forecast 3rd time to 2.7 pct

Xinhua, July 14, 2016 Adjust font size:

South Korea's central bank on Thursday revised down its 2016 growth forecast to 2.7 percent, the third downward revision in 2016 alone.

The Bank of Korea (BOK)'s growth outlook for 2016 was cut to 2.7 percent from 2.8 percent estimated three months earlier. The BOK's outlook was first revised down from 3.2 percent to 3.0 percent in January, before falling further to 2.8 percent in April.

The downward revisions came despite the central bank's cut in the benchmark interest rate by 25 basis points to an all-time low of 1.25 percent in June.

The government set aside about 10 trillion won (8.8 billion U.S. dollars) in extra budget for the second half of this year on growing worries that the ongoing restructuring in troubled shipbuilders and shipping lines would put additional pressure on the already struggling economy.

Under the self-restructuring plan, South Korea's top three shipbuilders, including Hyundai Heavy Industries, Samsung Heavy Industries and Daewoo Shipbuilding & Marine Engineering, plan to reduce overcapacity by 20 percent and cut workforce by 30 percent by the end of 2018.

The jobless rate kept rising in the country's southeastern coastal region where main shipyards are located, and massive layoffs are expected to come from shipbuilders as well as their subcontractors and partner companies.

The country's gross domestic product (GDP) growth picked up from 2.3 percent in 2012 to 2.9 percent in 2013 and 3.3 percent in 2014 each, but it turned downward to 2.6 percent in 2015.

The downturn came as exports, which account for about half of the export-driven economy, maintained the longest monthly fall amid global economic slump, while domestic production and consumption remained lackluster.

The BOK's growth forecast of 2.7 percent is lower than the government's outlook of 2.8 percent. Economic think tanks announced lower outlooks than the BOK's forecast, with 2.6 percent estimated by the state-run Korea Development Institute (KDI) and the Korea Institute of Finance (KIF).

LG Economic Research Institute and Hyundai Research Institute predicted a 2.5 percent growth in 2016, while the Korea Economic Research Institute expected a 2.3 percent expansion. Endit