By Na Jeong-ju
Staff Reporter
U.S. economic growth may fall to a seven-year low this year, hit by the subprime mortgage meltdown, according to the Bank of Korea (BOK) Tuesday.
In a report on the prospects for the U.S. economy, the central bank expects the United States to see a continuous fall in private consumption and construction investment, pulling down its economic growth. However, the economy may pick up slowly in the latter half of the year on a combination of factors, including a rise in exports, additional interest rate reductions, the government's stimulus package and private firms' efforts to resolve non-performing loans, the BOK said.
``Annually, U.S. economic growth is projected to fall to the lowest level since 2001 at a little over 1 percent,'' the report said.
The bank said three factors will decide the fate of the U.S. economy ― the sluggish housing industry; the growing losses of private firms from their investments in subprime-related securities and derivatives; and sluggish consumption amid rising inflation.
In December, the jobless rate soared to 5 percent, the highest since 5.1 percent in September 2005. The economic downturn may make it more difficult for people to get jobs this year, the report said.
The BOK forecast the United States will suffer $200-400 billion in subprime-related losses, citing opinions from global economists. It didn't rule out the possibility that the subprime shock will have a much greater spillover effect on the global economy.
``If the United States fails to reduce the risks, the crisis will turn much worse than we imagine,'' it said.
According to a survey by Bloomberg, the U.S. economy will probably grow at a 0.5 percent pace in the first quarter and at 1 percent in the second. Economists surveyed said a recession this year was an even bet as the economy lost jobs in January.