IMF forecasts Korea’s growth rate of 4.3% this year… 0.7%p ↑ from April
According to the Ministry of Strategy and Finance on the 27th, the International Monetary Fund (IMF) predicted Korea’s economic growth rate this year at 4.3% in its ‘Revision of the World Economic Outlook’. Previously, the International Monetary Fund (IMF) projected Korea’s growth rate to 3.6%, up 0.5 percentage points from its January forecast of 3.1%, through its global economic outlook in April. The 4.3% announced today is an additional 0.7 percentage point higher than the April forecast.
The IMF’s forecast for Korea’s economic growth this year is higher than the government’s forecast of 4.2%. It is the highest among the forecasts of major institutions. Earlier in May, the Bank of Korea had predicted Korea’s growth rate this year at 4.0%. The Asian Development Bank (ADB) also predicted that the Korean economy would grow at 4.0% on the 21st.
The adjusted growth rate (0.7 percentage points) is also higher than the average of developed countries by 0.5 percentage points, and is the third largest among G7 countries after the United Kingdom (1.7 percentage points) and Canada (1.3 percentage points). An official from the Ministry of Strategy and Finance evaluated, “It is very meaningful that the economic growth outlook for Korea has been greatly revised up amid the widening gap and the pace of economic recovery between countries.”
This forecast was compiled based on indicators through the second week of July. It is said that the number was taken into account even when the reinforcement of social distancing was discussed as a ‘fourth pandemic’ that has been going on since the beginning of July. The government analyzed that the increase in growth prospects despite the 4th pandemic was due to the 2nd supplementary budget plan worth 34.9 trillion won for the recovery of the people’s livelihood economy.
An official from the Ministry of Strategy and Finance said, “The IMF mentioned ‘fiscal policy’ as a factor for raising Korea’s growth rate. It is interpreted as that,” he explained.
IMF “mixed up and down risks… International cooperation such as vaccine cooperation should be strengthened.”
In this announcement, the International Monetary Fund (IMF) maintained its global economic growth forecast of 6.0% in April. However, there are concerns that the recovery of inequality between countries is getting worse than expected in April.
Looking at the forecasts by country, the forecasts for developed countries were generally revised upwards, while those for emerging and developing countries were revised down. For developed countries, it was raised by 0.5 percentage points to 5.6%. It is believed that the expansion of vaccine supply and the US economic stimulus package had an impact. The United States (7.0%) and the Eurozone (4.6%) rose 0.6 percentage points and 0.2 percentage points, respectively. For Japan, the forecast was lowered by 0.5 percentage points to 2.8%.
Emerging developing countries forecast 6.3%, reflecting India’s spread of COVID-19 and China’s austerity fiscal policy. This is a downward revision of 0.4 percentage points. India’s economic growth forecast was lowered by 3.0 percentage points to 9.5%, and China also lowered by 0.3 percentage points to 8.1%.
The International Monetary Fund (IMF) judged that both downside and upside risks to the global economic growth rate exist at the same time in the international context of the prolonged COVID-19. Factors such as delays in vaccine supply, the possibility of a reduction in the US stimulus package, and financial tightening caused by inflationary pressures were feared to have a negative impact on economic growth. On the other hand, the early end of COVID-19 due to cooperation in international vaccine supply and the early normalization of economic activities such as consumption and corporate investment could be a factor in boosting the economic growth rate.
It was recommended to strengthen international cooperation and maintain active policies in order to alleviate the recovery of inequality between countries and to sustain the recovery of the global economy. It expanded the supply of vaccines to low-income countries and offered liquidity support to vulnerable countries for debt restructuring in low-income countries. In addition, it was diagnosed that efforts to manage soundness, such as fiscal rules, are necessary when investing to prepare for the future by prioritizing spending on vaccines, infrastructure, and health.
The International Monetary Fund (IMF) also suggested that austerity should be avoided until inflationary pressures are clear, but that rapid policy change and market communication are necessary when economic recovery exceeds expectations.