SEOUL– The International Monetary Fund (IMF) on Tuesday slashed its economic growth outlook for South Korea this year to 3 percent from 3.3 percent amid the fast spread of the omicron variant of COVID-19.
The latest outlook is on par with the growth estimates of 3 percent by the Bank of Korea and the Organization for Economic Cooperation and Development. South Korea’s finance ministry put its 2022 economic growth outlook at 3.1 percent.
The downward revision came as the IMF forecast increased downside risks for the global economy this year, citing the accelerating spread of the omicron variant, the U.S. and Chinese economic slowdown and rising inflation.
The Washington-based organization lowered its 2022 growth forecast for the global economy to 4.4 percent from its October estimate of 4.9 percent.
The South Korean economy is on a recovery track on robust exports of chips and autos.
Asia’s fourth-largest economy expanded 4 percent last year from a year earlier, the fastest growth in 11 years and rebounding from a 0.9 percent contraction in 2020, according to central bank data. The Korean economy grew 1.1 percent in the fourth quarter of last year from three months earlier, better than a 0.3 percent on-quarter gain in the third quarter.
But it faces growing downside economic risks as the upsurge in COVID-19 cases and the fast spread of the omicron variant are casting doubts over the recovery of private spending.
South Korea’s daily coronavirus cases hit a record high of 8,571 on Tuesday, raising the total to 749,979.
The highly transmissible omicron variant is now the dominant COVID-19 virus strain in South Korea, as the omicron accounted for 50.3 percent of the newly reported variant cases last week. The country added 4,830 more omicron cases over the past week, putting the total at 9,860.
South Korea’s exports, which account for half of the economy, rose 22 percent on-year in the first 20 days of January on the back of solid demand for chips and petroleum products. For all of 2021, exports gained 25.8 percent on-year to hit a record high of US$644.5 billion.
Private spending grew 1.7 percent in the fourth quarter from three months ago, a turnaround from a 0.2 percent on-quarter fall in the third quarter.
The government proposed another extra budget of 14 trillion won ($11.7 billion) last week to support small merchants hit hard by the COVID-19 pandemic amid extended virus curbs.
The IMF raised its 2023 growth outlook for the South Korean economy to 2.9 percent from 2.8 percent.
Source: Yonhap News Agency