Korea’s growth outlook downgraded from 3.4% to 2.7%

As global growth forecast was revised downward and exports showed deepening doldrums, the growth estimate for this year was cut by 0.7%p, from a revised 3.4% in three months earlier. Significant reasons for the downward revision are that global growth projection for 2015 has been marked down roughly 0.4%p, Chinese economy shows a continuing slowdown, the weakening of Japanese yen and economic uncertainties in emerging markets increase. If the impact of MERS lingers until the end of July, it may bring the growth outlook down to 2.0%.

Consumer prices growth revised down to 1.0% from 1.4%

Consumer prices are expected to show a modest rebound, mainly attributable to an increase in utility prices such as gas, electricity and water in the latter half of the year. However, falling international oil prices and tepid domestic demand limit the size of the rebound, implying that annual consumer prices growth is forecast to be 1%, lowered than last year (1.3%).

Current account surplus expected to reach a record US$105 billion; USD/KRW projected at 1,101won for 2015

Despite a decline in export volume current account surplus for 2015 is forecast to reach a record US$105.4 billion boosted by minus import growth, resulting from a drop in unit price. USD/KRW is expected to a gradual depreciation at a yearly average of 1,101won, as the ascending pressure from strong-dollar remains.

Stimulating overseas investment and offering customized supports in order to alleviate relative upward pressure on Korean won

Some industries in Japan, which have been retaining unit export price to maximize their profits since the phenomenon of weakening Yen began, are expected to implement offensive price cutting strategy with the purpose of increasing market share. So as to ease upward pressure on Korean won against the Japanese yen, the regulations on overseas investment reporting system and scales of overseas investment should be revised so that businesses are not obligated to report to the government in advance. Additionally, overseas investment stimulus plan such as a separate taxation on overseas investment incomes and vitalization of the National pension’s overseas investment need to be implemented. Furthermore, it is inevitable to offer specifically designed export strategies for ASEAN markets where Japanese government actively increases their contributions. Domestic businesses first of all need to put their all efforts to reduce cost and enhance non-price competiveness and develop global business competency in the long run.

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