South Korea’s central bank shocked analysts when it announced its economy suffered a contraction of 0.3% in the first quarter of 2019. The announcement has prompted several economists to downgrade their 2019 growth forecasts for the East Asian nation.
Compared to last year’s first quarter, South Korea’s economy increased by 1.8%, missing the 2.5% expansion that Reuters poll had projected.
Economists Lower Their Forecast
At least three economists have downgraded their annual growth forecasts for South Korea. J.P. Morgan economist Seok Gil Park expects the South Korean economy to “rebound strongly” in the ensuing quarters. But he added that the poor first quarter results will drag down the country’s growth in 2019.
From the previous forecast of 2.6 percent annual growth, the economist has revised his projection downward to 2.4 percent. In 2018, South Korea had enjoyed a 2.7 percent annual economic growth.
Furthermore, market analysts from Australian bank ANZ in a report said that they see a lackluster growth in 2019 for South Korea. They changed their previous forecast of 2.5 percent expansion to 2.2 percent. ANZ said, “there are reasons to think Q1 may have marked the bottom for South Korea’s growth”. The bank said the global sales of semiconductors, a product that the country largely exports, will likely pick-up this year.
“Nonetheless, the big picture is that South Korea’s growth will likely be lackluster in 2019 and any recovery is expected to be gradual,” the bank said. “Customs trade data for the first 20 days of April suggest the export sector is still struggling for momentum”
London-based economic research consultancy Capital Economics gave a more negative outlook on South Korea’s economy. The firm’s economist Alex Holmes lowered his forecast from 2 percent to 1.8 percent expansion. “Any recovery in growth is likely to be very weak,” according to Holmes.
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