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Amid gloomy predictions of South Korea’s economic growth rate hovering around the 2.0% range next year, a private research institution released projections putting it even lower in the 1.5–1.9% range. Experts also predict that domestic consumption will decline next year as a continued slowdown in the global economy leads to reduced exports and investment returns.

“The domestic economy has exhibited an even faster loss of growth momentum than the global economy this year,” the LG Economic Research Institute (LGERI) said in a “2020 Domestic and Overseas Economic Forecast” released on Sept. 26.

“With the slowdown in global trade volumes predicted to continue and the semiconductor industry unlikely to bounce back, the growth rate for the South Korean economy is predicted to decline to 2.0% this year and 1.8% next year,” it said.

Coming amid predictions by domestic and overseas research institutions that have the economic growth rate bouncing back slightly to the mid-2% range next year, LGERI’s projection is the first to put the economic growth rate in the high-1% range. Many other institutions – including the OECD and ADB – lowered their projections for South Korea’s 2019 economic growth rate to around 2.1%, but most predicted it would recover slightly to 2.3–2.4% by next year.

LGERI first predicted that a recovery in the global economy is unlikely to happen next year. To begin with, it argued that a dramatic resolution of the US-China trade conflict is unlikely amid the US’ growing fears of losing economic dominance if China catches up in emerging industries. The report predicted the Eurozone growth rate would remain around 0% as the German economic slump spreads to other European countries, with the Chinese economic growth rate dipping to 5% amid limitations with its economic stimulus measures.

According to LGERI, the external conditions mean the slump in domestic exports is likely to continue, with the resulting burden spreading to the domestic demand economy next year through employment.

“Sales and operating profits for companies dropped sharply during the first half of this year, and the decline in profitability is expected to continue next year,” it predicted.

“The slowdown for individual businesses is likely to translate into a lower rate of increase for wages, with signs of a slowdown in consumption already manifesting during the second half of this year,” it added.

Experts were divided on the lowering of the 2020 economic growth rate projection to the 1–2% range. Sung Taeyoon, a professor of economics at Yonsei University, said, “With both domestic and overseas conditions looking poor, a recovery for the economic growth rate appears unlikely next year, so I’m inclined to agree with LGERI’s forecast.”

Kim Seong-tae, head of the economic forecast office at the Korea Development Institute (KDI), said, “There are a lot of variables in general, and I don’t really expect the conditions to improve next year, but there isn’t any basis for saying that next year will be worse than this one either.”

“It is true that companies’ operating profits have declined and the business environment has contracted, but this looks like they’re putting too much weight on those aspects and ‘undershooting,’” Kim said.

In a “2020 Economic Forecast” published on Sept. 20, the Hyundai Research Institute predicted a 2020 economic growth rate of 2.3% based on similar economic factors to LGERI’s, including low investment and domestic demand and weak growth in exports.

By Noh Hyun-woong, staff reporter

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