S.Korea's think tank cuts 2016 growth outlook from 3.0% to 2.6%

A woman shops for food at a convenience store in Seoul, South Korea, August 21, 2015. [Photo/Agencies]

SEOUL - South Korea's state-run think tank on Tuesday cut its 2016 growth outlook for the economy from 3.0 percent to 2.6 percent, reflecting falling exports and widespread concerns about the government-led corporate restructuring that may cause massive layoffs.

The Korea Development Institute (KDI) lowered its 2016 outlook by 0.4 percentage points compared with its forecast six months earlier.

The KDI outlook was much lower than the South Korean government's forecast of a 3.1 percent expansion in 2016 of the real gross domestic product (GDP). South Korea's real GDP increased 2.6 percent in 2015.

It was also lower than the Bank of Korea (BOK)'s economic forecast of 2.8 percent as well as 2.7 percent estimated by the International Monetary Fund (IMF) and the Organization for Economic Cooperation and Development (OECD).

The downward revision reflected falling exports, caused by the global economic slowdown and weakening competitiveness of domestic exporters amid fiercer competition.

Concerns spread widely about the government-led corporate restructuring in shipping and shipbuilding industries that had suffered from massive losses and falling orders amid the global economic slump.

If the corporate restructuring brings about massive layoffs and leads to weaker private consumption and corporate investment, the state-run think tank could lower its 2016 growth outlook further later in the year.

Facility investment was expected by the KDI to slow down this year due to faltering exports and external uncertainties.

Construction investment was forecast not to recover enough to bolster the economy as demand for new homes would weaken amid the lackluster economic growth.