The South Korean economy will likely grow 3.7 percent next year on the back of improving exports and expanding domestic consumption following a recovery in the United States, a think tank said Monday.
The Korea Institute of Finance (KIF) said in a report that the growth rate will hit 3.6 percent in the first six months and 3.9 percent in the latter half of 2015. The think tank's 2014 growth estimate stood at 3.5 percent.
The KIF's 2015 forecast is lower than the central bank's 3.9 percent projection, but similar to major research institutions and brokerage houses' outlook of an average 3.7 percent economic growth for South Korea next year.
"The 2015 growth rate is expected to improve on recovering export and domestic demand," the KIF said. "South Korea's exports will be on a steady rise as the world economy will slightly go up next year with the recovering U.S. economy expected to offset other countries' slumps."
Exports will likely jump 5.4 percent next year, compared with a
3.5 percent growth estimate for 2014, while domestic demand will climb 3.3 percent, up from 2.1 percent, as low interest rates and government-led stimulus will stir up consumer confidence.
The think tank noted that the South Korean government should be prepared for fluctuations and uncertainty in the global financial market as major countries take their own monetary policies, such as Japan with its quantitative easing.
"(The financial authorities) should come up with pre-emptive measures to deal with external and internal risks," the KIF said.
"They have to strengthen stress testing in the foreign currency market and monitor macroeconomic health."
The KIF also said that rising household debts should be closely watched and controlled in case of wider fluctuations in the real estate market.
According to data, household credits surpassed 1,000 trillion won earlier this year, and their pace is getting faster since the government eased mortgage loan regulations in order to boost the sluggish housing market. (Yonhap)
