IMF I can’t believe… The reason for the embarrassment is that the outlook for the growth rate in Korea has been greatly deviated

The appearance of an exhausted job seeker [사진=연합뉴스]

Korea’s economic growth rate announced by the Bank of Korea last year was significantly higher than the growth rate expected by the International Monetary Fund (IMF) in October. The IMF, which was evaluated as the most reliable among international organizations to announce the growth rate, has virtually’failed’ in the Korean economic outlook. It is an analysis that the characteristics of organizations that are trying to amplify the crisis and the attitude of disrespecting the opinions of governments in each country caused such a prospect disaster.

Actual -0.99% vs IMF -1.9

On the 26th, the Bank of Korea announced that in 2020, real GDP fell by 1% compared to the previous year to 1830 trillion 5802 billion won. The GDP growth rate looked at to the second decimal place was -0.99%. It is the worst indicator since -5.1% in 1998, but considering the pandemic of the novel coronavirus infection (Corona 19), it is evaluated that it was saved.

This is far above the IMF’s estimate of -1.9% for the Korean economy’s growth rate announced in October last year. In fact, the IMF has failed to forecast Korea’s economic growth rate. Compared to last year’s economic outlook by domestic and overseas organizations that publish their growth rate forecasts, it is dismal.

The Organization for Economic Development Cooperation (OECD) presented Korea’s growth rate forecast twice in September and December last year. The forecast was -1.0% in September and -1.1% in December. The Korea Development Institute (KDI) predicted the growth rate of -1.1% last year in the Korean economic outlook released last November.

The Asian Development Bank (ADB) looked at the data until November and presented a growth rate of -0.9% last month. The Ministry of Science and Technology expected 0.1% growth in June and negative growth of -1.1% in December. Although these institutions are not fully aligned with the economic growth rate, the margin of error is 0.1%, which is only one tenth of the error of the IMF.

IMF living on crisis

Experts give several reasons for the major failure of the IMF’s economic outlook. First of all, it is a matter of institutional characteristics.

The IMF is a shining institution in crisis. The IMF was founded with the World Bank when the Bretton Woods system was launched in 1945. Its core function is to provide emergency loans to countries with a shortage of dollars by using funds raised by developed countries such as the United States. As each country’s liquidity crisis comes, the role and influence of the IMF expands. Experts believe that for this reason, the IMF has emphasized the corona crisis more than other institutions.

In fact, the IMF has looked at the Korean economy most pessimistically over the last year. When the pandemic started in April, the first negative growth was forecast at -1.2%. In June, the decline in the growth rate expanded to -2.1%. At that time, before the second pandemic, the Korean government was hoping and insisting that it would not grow reversely (0.1% growth).

Even in October, when the situation stabilized after the second epidemic, the growth rate only rose to -1.9%. An official from an economic ministry explained, “There is a saying that the IMF lives on a crisis,” and said, “This must have been reflected in the pessimistic prospects so far.”

I didn’t listen to the Korean government’s explanation…

It is also pointed out that the IMF is blind to the data estimated directly rather than the explanations of each government. The IMF communicates with government officials and provides forecasts for growth rates. It reflects the opinions of the governments of each country in the data estimated directly.

It is known that this year, in the process of consultation with the Korean government, the data directly estimated by the IMF was particularly emphasized. During the October outlook, the Korean government explained in detail the 1st and 2nd quarter GDP estimates and the 3rd quarter forecasts, and announced that the growth rate is unlikely to be close to -2%, but their data reflecting the second outbreak in August and September were more accurate. It is an explanation that he adhered to the position.

Some analysts say that such changes in the IMF accelerated after the appointment of Bulgarian-born President Cristalina Georgeva. It is said that, as the governor from Bulgaria, which is a relatively small economy, has come to the position that had been held by those from advanced countries, he is focusing on the issue of developing countries and foreign aid. In this process, it is pointed out that existing strengths are fading.

How was the IMF economic outlook over the past 10 years?

The error between the IMF’s October forecast and the BOK’s January breaking news

Over the past decade, the IMF’s October outlook and the Bank of Korea’s breaking news released in January of the following year matched to the first decimal place three times in 2019, 2016, and 2013. In 2019, the BOK breaking news and the IMF forecast were the same at 2.0%. In 2016 and 2013, they were the same at 2.7% and 2.8%, respectively.

The largest error was in 2012, reaching 0.7 percentage points. In 2011, there was a difference of 0.4 percentage points, which is believed to be a factor that increased the margin of error due to the high volatility of countries around the world as the aftermath of the global financial crisis continues. However, this is different from last year in that the IMF predicted the growth rate of Korea higher than it actually was.

Reporter Kang Jin-kyu [email protected]