Finance minister signals cut in growth forecast, warns of downside risks

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Finance minister signals cut in growth forecast, warns of downside risks

Published: 25 Oct. 2024, 14:02

SHIN HA-NEE
[email protected]

Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok speaks during a meeting with reporters in Washington on Thursday. [MINISTRY OF ECONOMY AND FINANCE]

Finance Minister Choi Sang-mok indicated a possible cut to the government’s growth forecast for this year after Korea’s economic growth remained tepid in the third quarter, warning against burgeoning downside risks.

The comments were made at a meeting with reporters in Washington on Thursday during the finance minister’s trip to the United States for the G20 Finance Ministers and Central Bank Governors Meeting.

The Bank of Korea (BOK) data released earlier that day showed that the real GDP expanded 0.1 percent on-quarter in the July-September period, lower than market expectations.

"Downside risks regarding the prospect for this year's economic growth have certainly grown," said Choi, adding that the annual growth forecast may be adjusted depending on economic trends through the fourth quarter.

The minister noted that “the domestic demand, such as consumption, has been improving as anticipated, but construction investments remained sluggish and export growth slowed.”

Net exports were responsible for a 0.8 percentage point drop in growth in the third quarter; a rebound in domestic demand just barely overcame the slump, contributing a 0.9 percentage point increase, according to the central bank.

The Ministry of Economy and Finance earlier expected the economy to grow 2.6 percent in 2024, while the BOK presented a 2.4 percent expansion.

Regardless of the fourth-quarter data, however, Choi insisted that this year's growth is still expected to be higher than the potential growth rate of 2 percent.

As for exports, the minister pointed to growing uncertainties and said the government will respond "with extra vigilance."

The central bank also hinted at a downward adjustment on its growth forecast on Thursday.

“In order for annual economic growth to come to 2.4 percent, quarterly growth in the fourth quarter should come to at least 1.2 percent,” said Shin Seung-chul, director-general of the BOK’s economic statistics division, during a press briefing, characterizing such an outcome as “arithmetically difficult” given the third quarter's results.

BY SHIN HA-NEE, YONHAP [[email protected]]