The South Korean economy is likely to grow at a faster pace than previously expected in 2017 on the back of rising exports, a leading private think tank said Thursday.
In its latest economic outlook, the Korea Economic Research Institute (KERI) projected Asia's fourth-largest economy to grow 2.5% this year, up from its earlier 2.1% estimate made in December. The think tank forecast the South Korean economy to expand 2.3% in the first half of this year and 2.7% in the second half. 
KERI, affiliated with the country's conglomerate lobby Federation of Korean Industries, attributed its upward revision to an expected improvement in the growth rate of the world economy that will boost South Korea's exports.
The think tank's forecast, however, is still lower than South Korea's 2016 growth rate of 2.8%, and it said the country will continue to be gripped by flaccid domestic demand and find little room to take stimulus measures. "South Korea is still faced with structural reasons for weak domestic demand and has limited conditions for monetary, fiscal and currency policies," KERI said. "In addition, a recovery in global trade could be hampered by US rate hikes and protectionist moves, as well as Europe's anti-globalization trend." A senior KERI researcher, Byun Yang-kyu said potential Sino-American trade disputes may have a negative impact on South Korea's exports this year. 
"Should trade conflicts between China and the United States materialize, global trade could again lapse into the doldrums, which would in turn deal a harsh blow to South Korea's overseas shipments," Byun said. "South Korea needs to diversify its export markets and push for regional free trade talks." South Korean exports have been on a roll in recent months. The country's exports spiked 20.2% on-year to US$43.2 billion in February, marking the fastest rise in five years and the fourth-straight month of increase.
According to KERI, South Korea's private consumption, one of the two growth engines together with exports, is expected to expand 1.8% on-year this year, down from a 2.5% increase the previous year. Corporate capital spending is projected to grow 2.7% this year from 2016, a sharp turnaround from a 2.3% decline a year earlier. 
South Korea's consumer inflation is predicted to reach 1.6% in 2017, compared with a 1% gain the previous year, with its current account surplus likely to decrease to $92.2 billion from $98.7 billion.

Source: QNA