Effectiveness of South Korean Government’s economic prediction is being questioned as it is very different from actual values. Some are criticizing South Korean Government as it impedes effective operation of economic policies by presenting predictions that are too optimistic.
According to industries, major economic indexes are expected to be far lower than predictions made by Ministry of Economy and Finance (MOEF).
As third quarter’s GDP (Gross Domestic Product) is only 0.6% higher than that of second quarter, it has become difficult for South Korean Government to reach its prediction on this year’s growth rate at 2.9%. The Bank of Korea’s prediction of 2.7% is also uncertain. It is also seen that increase in number of new employees (180,000 per month) presented by MOEF is impossible to achieve. Recently, Minister Kim Dong-yeon of MOEF also recognized the fact that it will be difficult for South Korea to achieve predictions on growth rate and increase in number of new employees.
Predictions made by MOEF on growth rate and increase in number of employees were actually downgraded only 4 months ago. However, because these predictions still seem to be very different from actual values, there are criticisms towards South Korean Government’s ability to predict economy in the future.
Although South Korean Government have been downgrading its economic prediction in the middle of a year, number of times when its predictions were very different from actual values have been happening in recent years. According to Yoo Sung-yeop, who is a member of Party for Democracy and Peace, MOEF’s prediction on growth rate had been off for the past 5 years.
South Korean Government’s ‘optimistic prediction’ is seen as the fundamental problem.
MOEF usually presents its prediction on the following year’s growth rate during this time of a year, and some are pointing out the fact that it presents values that are too optimistic. Actually, only time its prediction surpassed actual values in the past 5 years was last year (prediction: 2.6%, performance: 3.1%).
“South Korean Government believes that it needs to provide positive signals to South Korean markets.” said an economic expert. “However, if its prediction continues to be off, it will start losing credibility and it will not be able to operate economic policies effectively.”
People are interested on ‘Direction of Economic Policies in 2019’ that will be announced by MOEF next month.
It is expected that MOEF will adjust its predictions for this year and next year at this announcement. There is a high chance that it will downgrade its predictions on growth rates of this year (2.9%) and next year (2.8%).
Private economic research institutes such as Hyundai Research Institute (2.6%) and LG Economic Research Institute (2.5) and an international organization such as IMF (2.6%) are already predicting lower 2019 growth rate than South Korean Government.
“We are currently looking into how we are going to adjust our prediction for next year’s growth rate.” said Minister Kim of MOEF.
Staff Reporter Yoo, Seonil | ysi@etnews.com