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By Park Hyong-ki
The state-run Korea Development Institute (KDI) has revised the country's growth forecast to 2.4 percent from 2.6 percent this year, the think tank said Wednesday.
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Falling exports amid the U.S.-China trade conflict, as well as weak private consumption and investment have led to Korea's deceleration faster than expected, said Kim Hyeon-wook, a KDI director.
"The global economy is slowing down faster than we had expected," Kim told the press.
"Our economy is going down the path it took following the 2008 global financial crisis."
Under the circumstances, Korea will grow well below its potential of 2.6 percent to 2.7 percent this year, he added.
This comes immediately after the OECD revised Korea's 2019 growth to 2.4 percent from 2.6 percent due to weak exports and domestic demand.
Moody's Investors Service also said Korea is projected to grow 2.1 percent this year, its slowest rate since the global financial crisis.
Like the OECD, the state-run KDI suggested an accommodative monetary policy as the inflation is well below the 2 percent target.
In a separate KDI report, it said Korea would end up growing less than 2 percent in 2020, if the government does not efficiently readjust and reallocate its policies and resources for innovation.
The OECD also suggested the government prioritize regulatory reform and policies to "promote dynamism" in small- and medium-sized enterprises in services.
Along with the OECD and Moody's, the think tank said fiscal stimulus will be inevitable this year.
"The slowdown has become plain and clear. And those reports are saying that we need to correct our policy to support productivity," said Sung Tae-yoon, an economist at Yonsei University.
Sung agreed fiscal expansion was necessary, noting the OECD suggestion that it should continue in 2020.
The government will have to be more "prudent" in managing its finances, he added.
The OECD projects the gross state debt to stay below 45 percent of the GDP after taking into account Korea's supplementary budget to tackle fine dust.
Analysts say the administration's biggest challenge would be job creation amid falling exports and investments.
Exports are projected to increase 1.6 percent this year. Last year, exports rose 4.2 percent from 2017. Facility investment will drop 4.8 percent this year, after it fell 1.6 percent in 2018, according to KDI.
"Boosting employment growth will be one of President Moon Jae-in's most important economic challenges this year," said Rajiv Biswas, chief economist at IHS Markit in Singapore.
