2009 Growth Likely to Fall Below 3%
By Lee Hyo-sik
Staff Reporter
Major economic research institutes at home and abroad have cut Korea's 2009 growth rate to below 3 percent in recent months on growing concerns of a prolonged global recession and its fallout on the export-dependent economy.
The International Monetary Fund (IMF) is widely expected to jump on the bandwagon in the coming days, sharply slashing its forecast for the country's growth in 2009. After attending the G20 summit in Washington, President Lee Myung-bak told reporters Sunday that the IMF in the near future will likely lower Korea's growth projection for next year to below 3 percent from the 3.5 percent it predicted early last month. In June, it forecast that the world's 13th largest economy would expand 4.3 percent in 2009.
The Washington-based organization already announced last month that the United States and other major advanced economies will contract next year, as the unfolding global financial market meltdown will have a negative impact on consumption and investment worldwide.
Early this month, the state-run Korea Development Institute (KDI) projected that the Korean economy will grow 3.3 percent next year from a year earlier, while Samsung Economic Research Institute put Korea's 2009 growth rate at 3.6 percent, with UBS floating the possibility of only 1.1 percent growth.
Moody's also estimated Asia's fourth largest economy would grow around 2 percent in 2009, saying it is facing increasing downside risks in the wake of the global economic downturn, as domestic demand continues to deteriorate, failing to offset falling outbound shipments. The Organization for Economic Cooperation and Development (OECD) last week slashed its 2009 growth projection for Korea to 3.2 percent from 4.3 percent in June.
Reflecting unfavorable conditions at home and abroad, the Korean government also lowered its 2009 growth forecast to around 4 percent from an earlier 5 percent when it revised next year's budget upward by 10 trillion won to 283.8 trillion won early this month. But the 4 percent rate is still substantially higher than those of most private research institutes.
The Bank of Korea (BOK), which will announce the nation's official economic growth forecast in early December, is widely expected to reduce its estimate. BOK Governor Lee Seong-tae told lawmakers last month that the economy would likely grow by around 4 percent next year.
But several weeks later, Lee said the growth rate could drop further, citing falling exports, sluggish domestic consumption and other deteriorating economic conditions.