SEOUL, July 29: South Korea’s negative output gap is expected to last through the end of 2017 after expanding in the latter half of this year, the Bank of Korea said on Friday. This suggests the economy may not gain as much momentum as it needs to escape low growth next year. The output gap is the difference between an economy’s actual output and the output it could achieve at full capacity. Last year, the central bank said South Korea could possibly see the negative output gap close in late 2016 or in 2017, but the timing for that improvement has been continuously pushed off. This has largely been due to a number of downside factors such as a corporate restructuring of the country’s massive shipping and shipbuilding sectors as well as offshore uncertainties, including Britain’s exit from the European Union. In its biannual report on monetary policy, the BOK added that domestic consumption is expected to show mild improvement for the rest of the year, but capital investment will “fall considerably” in 2016 from a year earlier due to the restructuring and Brexit. Earlier this month, the central bank downgraded its growth forecasts for this year and 2017 to 2.7 percent and 2.9 percent, from 2.8 percent and 3.0 percent, respectively. (AGENCIES)
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