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Macroeconomic outlook for the second half of 2016

Author Industry and Trade Analysis Division Date 2016.06.23 Issue No 628
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The Korean economy is expected to record an annual growth rate of 2.6%, similar to that of last year, thanks to a slight recovery from sluggish exports and a minor increase in private consumption despite the impact of industrial restructuring. Facility investments, however, may enter a phase of decline.
○ This year will post similar quarterly growth rates for both the first and second halves, while growth rates per annum will be high in the first half and low in the second half due to the base effect from last year’s growth pattern.
○ External factors will likely include a hike in U.S. interest rates, China’s growth recession, and geopolitical instability. Internal factors forecast downside risks as there could be aftermaths from structural adjustment and stock coordination in the industry.

 

The recent drop in oil prices and reflationary measures by the government are anticipated to have a positive impact on private consumption, despite various constraints such as household debts, housing expenses, and industrial restructuring.

 

Facility investment will come to a halt as a consequence of exponential growth in the last two years and high in-stock rates; construction investment, on the other hand, will continue to increase thanks to growth spurts in the industry.

 

Exports in the second half will moderately recover as a rebound in oil prices from the first half is expected to raise the value of goods; nevertheless, annual exports are likely to report a significant decline.
○ It is prospected that exports and imports will decrease by 6% and 8% respectively, but the balance of trade will post a substantial surplus of $93 billion, a slight increase from last year.