KERI Economic Bulletin (December. 2016 No.86)

KERI Economic Bulletin (December. 2016 No.86)

The growth rate is projected to be 2.1% in 2017, lowered by 0.1%p than the previous forecast in September. In accordance with domestic, as well as global factors, the 2017 forecast is adjusted downward by 0.3%p than 2016. While in a domestic sense, the effectiveness of monetary, fiscal and foreign exchange rate policy are all regarded as limited, the heightened uncertainty of world growth also influences the growth rate. The weak global trade is likely to sustain in 2017 owing to the high possibility of epidemic anti-globalization trend, ignited by the US election. French presidential election is to be held in between this April and May, and while for Germany, it’s between September and October. To make matters worse, the additional fiscal expenditure is now regarded as obsolete. The overall consumer price is projected to soar marginally by 1.2% in 2017 compared to this year’s 1.0%. Amid the restriction of crude oil price increase and the appreciation of KRW, sluggish growth will likely lower the probability of consumer price to rise. The trade surplus is forecast to slide down to US$93.5 billion in 2017, compared to US$97.5 billion this year. The huge current account surplus is likely to be on a gradual decline as the good’s import loss and service deficit grow. USD/KRW will rise gradually in the 1st half in 2017 owing to the influence of Trump’s election and European political uncertainty, which is projected to gradually revert down in the next half to 1,152 won reaching to the year’s average. The market interest rate (Corp AA-, 3yr) is expected to rise by small margin as 2.3% in 2017 from 1.9% in 2016 for US tapering shall have a limited effect on the Korean market, growth rate of the Korean economic growth is weakening, and low inflation rate is expected to sustain.