The International Monetary Fund (IMF) said on the 14th that despite the Middle East crisis it kept this year's outlook for Korea's economic growth at 1.9%, the same level as in January. However, it raised this year's inflation outlook to 2.5%, up 0.7 percentage points from the most recent forecast in Oct. last year (1.8%).
The IMF released its World Economic Outlook that day. The IMF issues economic forecasts for major countries every January, April, July and October. In January, the IMF forecast Korea's growth at 1.9% this year and 2.1% next year, and it maintained those projections in this outlook. A government official said, "Korea's economy is being affected by the Middle East war, but the effect of the supplementary budget is expected to offset it."
However, this outlook assumes the Middle East war continues for several weeks and energy production and exports normalize from midyear. It assumed an average international oil price of $82. That is similar to the low-$80 range for this year's average prices of Dubai crude, Brent crude and West Texas Intermediate (WTI).
The IMF said that if the Middle East crisis drags on and the average international oil price exceeds $100, it could lower the world economic outlook. In this outlook, it cut this year's projection to 3.1% from 3.3%. It said if the average international oil price rises to $100, the outlook could be lowered to 2.5%. It also said that if the international oil price climbs to $110, the projection could be cut to around 2%. In that case, Korea's growth outlook would also likely fall from 1.9%.
The IMF projected that the Middle East crisis will push up global prices significantly. It raised the global inflation outlook to 4.4%, up 0.6 percentage points from January. Korea's inflation is projected at 2.5%, up 0.7 percentage points from the most recent forecast in Oct. last year (1.8%). The IMF projection is higher than the Bank of Korea's (2.2%). However, Bank of Korea Governor Rhee Chang-yong also said at a press briefing on the 10th, "Due to the aftermath of the Middle East war, this year's consumer price inflation is expected to significantly exceed the 2.2% projection made in February."
Meanwhile, the IMF also kept this year's growth outlook for advanced economies such as the United States and the eurozone at 1.8%. It lowered the United States from 2.4% to 2.3% and the eurozone from 1.3% to 1.1%. Japan, by contrast, was kept at 0.7%. Emerging and developing economies were cut from 4.2% to 3.9%. China was revised down from 4.5% to 4.4%, while India was revised up from 6.4% to 6.5%.