South Korea on Monday warned of a more severe economic slowdown than expected, lasting at least through the first half of next year, and extended sales tax cuts on some fuel oil goods and passenger cars for a few more months.
“Our economy’s growth is expected to slow next year due to the effects from a global economic slump, and the difficulty will be focused on the first half,” Finance Minister Choo Kyung-ho said at a meeting with the ruling party leadership, according to Reuters reported.
As the country with the fourth-largest economy in Asia, South Korea depends largely on exports of goods including cars, ships, electronics, and smartphones. Growth is forecast to drop to below 2% in 2022 from near 3% this year.
After a scheduled revision last month, the central bank lowered its forecast for economic growth in 2023 to 1.7% from 2.1%, citing a projected decline in corporate investment due to falling exports.
Since the economy should now rely more on domestic consumption to counter slowing export demand, the finance ministry has extended tax incentives on fuel oil products and passenger car sales by up to six months beyond their initial end-of-2022 expiration date.