Seoul — South Korea revised down its 2017 growth outlook on Thursday, citing increased uncertainties in the United States and a sagging recovery in domestic consumption, AP reports.
The Finance Ministry said Asia’s fourth-largest economy will likely expand 2.6 percent next year, down from its earlier forecast of 3.0 percent. It also downgraded its projected growth for this year to 2.6 percent from 2.8 percent.
The pace of interest rate increases in the U.S. are one factor for concern, while President-elect Donald Trump’s still-to-be-decided trade policies are another, the ministry said. Those uncertainties in the U.S., a major trading partner for South Korea, could pressure domestic consumption and export growth next year.
At home, spending by businesses and consumers has weakened amid a major political scandal that led to President Park Geun-hye’s impeachment. The political uncertainty and a presidential election likely to be held next year have made companies reluctant to make investments.
South Korea faces a string of other challenges, including its high youth unemployment rate, record-high household debts, and corporate restructuring in its shipping and shipyard industries that have shed tens of thousands of jobs. South Korea likely will add fewer jobs next year than in 2016.
The country has been struggling to increase its stubbornly low birth rate to slow a rapidly aging population. Starting next year, South Korea’s population from 15 to 64 years of age will decline.
In response to the slowing growth, the government plans a 20 trillion won ($16.5 billion) stimulus package. It also plans to increase hiring in the public sector and pressure state companies to spend more. It also plans to give tax benefits to newly married couples to encourage more marriages.