By Lee Hyo-sik
Staff Reporter
The South Korean economy is facing an increasing risk of falling into recession in the face of rapidly sinking exports and continued sluggish domestic demand, the state-run Korea Development Institute (KDI) said Wednesday.
The think tank also said that even though the domestic financial market has stabilized to some extent in recent months, thanks to the Bank of Korea's interest rate cuts and currency swap arrangements with the U.S. and other economies, a global credit crunch continues to dog local banks and businesses.
``The possibility of an economic recession is running high as domestic demand and exports have been falling rapidly. Industrial production has been declining at a faster pace over the past few months. Private consumption also continues to head downhill as consumers tighten their purse strings because of slower income growth amid the tight job market and worsening business conditions,'' the institute said in a monthly economic assessment report.
According to the National Statistical Office (NSO), industrial production contracted 14.1 percent in November from a year earlier, the steepest decrease since 1970 when the statistical office began compiling the data. It has been falling for three consecutive months.
Service sector output also fell 1.6 percent from a year ago, as industries ranging from wholesale and retail to real estate services were hit by the economic slowdown.
Sales of consumable goods contracted by 5.9 percent over the same period, decreasing more than during the 1997-98 Asian financial crisis. Among others, consumers cut spending sharply on high-priced durable goods.
The nation's outbound shipments dropped 17.4 percent in December from a year ago because of stagnant overseas demand for Korean-made goods, while imports plunged 21.5 percent mainly due to falling prices of crude oil and other commodities.
With falling industrial production and private consumption, the number of new job offerings in November fell to a five-year low of 78,000 as companies became more reluctant to hire new workers. It was the lowest level since December 2003, when new job offerings stood at only 44,000.
A key index measuring the economic outlook dropped in November for the 12th consecutive month since December last year, indicating businesses and households are becoming more pessimistic about the economic outlook.
The current account surplus reached $2.06 billion in November, down from $4.75 billion a month earlier, mainly due to falling oil import prices and other commodities as a result of the deepening global recession.
Consumer price growth slowed to 4.1 percent year-on-year in December from a 4.5 percent gain in November as declining import prices lowered the costs of goods and services here.