“Monetary policy: cautious and flexible” recommended
Korea’s growth rate remains at 2.5% this year
The International Monetary Fund (IMF) assessed that the risk factors for a downward adjustment of the global economy are increasing. Central banks in each country were advised to implement monetary policy carefully and flexibly, taking comprehensive consideration of price, growth, and employment situations. The fiscal authorities were asked to strengthen a sound fiscal policy to secure fiscal space.
◆Korea’s 2.5% growth forecast = According to the Ministry of Strategy and Finance on the 23rd, the IMF predicted that the Korean economy this year will grow 2.5% compared to the previous year in its ‘October World Economic Outlook’. It is the same as last July’s forecast (2.5%).
It is higher than the Bank of Korea’s forecast (2.4%) and lower than the government’s (2.6%). It is the same as the Organization for Economic Cooperation and Development (OECD, 2.5%), the Korea Development Institute (KDI, 2.5%), and the Korea Institute for Industrial Economics and Trade (2.5%).
Korea’s annual economic growth forecast for next year was also maintained at 2.2%.
The IMF also presented this year’s global economic growth rate forecast at 3.2%, the same as last July. The growth rate of the developed country group (41 countries, including Korea, the United States, the United Kingdom, Germany, France, and Japan) is expected to be 1.8% this year. By country, the United States (2.8%) was adjusted upward by 0.2 percentage points from last July (2.6%) due to improved consumption due to the rise in real wages.
The growth rates of most European countries, including the UK (1.1%), France (1.1%), and Spain (2.9%), were also projected upward due to the impact of monetary policy easing. Japan’s growth forecast was revised down 0.4 percentage points to 0.3% from last July (0.7%). The Ministry of Strategy and Finance explained that this is a result of negative impacts such as disruption in automobile production. The growth rate of the emerging developing countries group (155 countries, including China, India, Russia, and Brazil) is expected to be 4.2% this year.
China’s growth rate forecast (4.8%) was lowered by 0.2 percentage points compared to last July (5.0%). The continued downturn in the real estate market in China and worsening consumer sentiment were given as reasons for the downward revision.
◆Recommendation for prudent monetary policy = In addition, the IMF recommended that central banks in each country implement monetary policy cautiously and flexibly by comprehensively considering the price, growth, and employment situation. The Ministry of Strategy and Finance reported that it requested financial authorities to strengthen sound fiscal policies to secure fiscal space and provide selective support to protect the vulnerable.
Meanwhile, the IMF assessed that the risk factors for a downward adjustment of the global economy have expanded compared to the forecast in July.
Possible factors for upward adjustment include recovery of investment in major developed countries and improvement in potential growth rate due to the spread of structural reform momentum. On the other hand, the negative impact on growth and employment due to the lag effect of the tight monetary policy, the continued contraction of China’s real estate sector, the strengthening of global protectionism, and the rise in raw material prices due to the deepening of the geopolitical crisis were pointed out as risk factors for downward adjustment. This means that the risk factors for downward adjustment of the global economy are increasing more than the factors for upward adjustment. Reporter Seong Hong-sik king@naeil.com
