Korean economy to rebound in 2013
By Kim Tae-jong
Kwon Goo-hoon Goldman Sachs economist
The Korean economy is expected to bounce back in 2013, with the nation’s real gross domestic product (GDP) growing 3.4 percent, according to Goldman Sachs Wednesday.
“The growth forecast is within the reach because Korea’s economy is largely dependent on the global backdrop, and the global economy should show a slow yet steady recovery from next year,” said Kwon Goo-hoon, chief economist at Goldman Sachs, during a news conference at the Lotte Hotel Seoul.
Kwon noted that Korea’s major trading partners will post 3.6 percent growth in GDP on average, although Europe will suffer stagnation.
He stressed that the Asian economies are large in terms of GDP and domestic demand, expecting they will likely account for two thirds of global growth next year.
As net oil importers, most Asian countries will gain benefits from lower oil prices, including Korea, he added.
The economist said the nation’s exports will grow further next year by around 6 to 7 percent and consumption will also increase supported by a stimulus and low oil prices accompanied by low inflation at below 3 percent.
He also forecast the gradual appreciation of the Korean won after weakness in early 2013, saying it may reach 1,030 won against dollar by year-end.
“The local currency will continue to strengthen and it might dip below 1,000 won (against dollar) in 2014,” he said. “But around that time, the value of the dollar will start to go up and the Korean won will begin to weaken again,” he said.
He also said he believed that the government would not artificially control the currency rate, which was not necessary. This is a different view from some market insiders’ anticipations that the financial authorities could intervene in the market if the won-dollar exchange rate falls below a certain level to protect the export-driven economy.
As risk factors, he mentioned the upcoming presidential election on Dec. 19 and the formation of a new government, growing household debt, and North Korea’s relationship with the new South Korean leadership.
But he downplayed the household debt problem, arguing it was still at a manageable level because it was not out of line with those of other OECD countries.
Regarding the stock market, he forecast that the estimated baseline for the KOSPI would be 2,300 next year, fluctuating between 2,000 and 2,450. Kwon added that shares in technology, automobiles, steel and banking were likely to gain ground next year.
“Technology and the automotive business will be as good as this year, and steel makers can revive due to growing demand from China and a cut in the prices of raw materials,” he said.