The South Korean economy is expected to grow 3 percent for the second consecutive year in 2018, helped by upbeat exports and increased domestic consumption, a state think tank said Monday.
The Korea Institute for Industrial Economics & Trade (KIET) expected the real gross domestic product (GDP) for Asia’s fourth-largest economy to expand 3 percent in 2018, which is 0.1 percentage point lower than the number forecast for this year.
“The local economy may experience slower growth in 2018 due to robust exports and investment this year, but the domestic consumption will rise thanks to hikes in the minimum wage and the government’s labor-friendly policies,” the KIET said in a 2018 economy prospect report.
The projection is the same as estimates by the finance ministry and the International Monetary Fund, and higher than the average of nine investment banks at 2.8 percent.
The private sector consumption would increase from 2.3 percent to 2.7 percent next year as the minimum wage is set to soar by 16.4 percent to 7,530 won (US$6.9) per hour starting in January, marking its biggest jump in nearly two decades.
The institute expected the total trade volume to reach over $1 trillion for the second year in a row, but the pace of growth in exports will be slow compared with this year’s strong figure, the KIET said.
“South Korea’s exports will continue to rise next year in line with the global economic recovery, but the growth rate will be tardy due to a high base effect,” the report said.
The semiconductor sector will continue to enjoy rallies, while the shipbuilding, steel, textile, home appliance and display sectors could face global oversupply and rising protectionism in major trading partners, including China and the United States, it noted.