Global Economist Warns of Triple U
By Kim Jae-kyoung
Staff Reporter
A noted global economist forecast that South Korea will follow a “triple U” shape recovery, suggesting that the economy will see two more downturns down the road.
At a press conference at Lotte Hotel in Seoul, Monday, Norbert Walter, chief economist for Deutsche Bank Group and CEO of Deutsche Bank Research, said that the global economy is still in recession.
“We are not out of recession. The global economy will undergo a triple U-shape path, not a V or U. We just experienced the first U,’’ he said. He predicted that the global economy will see two more downturns over the next two or three quarters when unemployment rises and central banks begin implementing exit strategies from stimulus policies.
He pointed out that since Korea has been deeply integrated into the global economy, Korea will also follow the footsteps of the global economy.
“We will know at the end of 2010 and at the beginning of 2011 when we have the last recession and enter an upswing,’’ he said.
Regarding the Korean economy, Walter forecast that the Korean economy will see positive growth next year but the upward trend will not continue going forward.
“For the next four years, Korea will maintain a 4 percent growth rate but after that, growth rate will go down,’’ he said.
He expects that the Bank of Korea (BOK) won’t be the first to hike interest rates
“I think the BOK will not be among the first, but in the middle following the Bank of Australia and the Bank of China,’’ he said, suggesting that the BOK should take action after the U.S. Federal Reserve raises key rates. He expected the Fed to shift to a credit-tightening mode in April next year.
The veteran economist downplayed concerns over the nation’s short-term foreign debt.
“High short-term external debts and the global credit crisis led to severe Korean won weakness, but risks are easing. Short-term debt is what the government should look at but it is not an important factor now,’’ he said.
He noted that Korea is not an emerging country but a mature economy, calling for the country to focus more on productivity and innovation.
“In order to be successful, Korea needs to spend more on research and development to keep up its leading edge in tech to remain as a high performing OECD economy,’’ he said.